Unit-1 Q1. Define Management Accounting. Explain the nature of Management Accounting.

Meaning. Management Accounting is the presentation of accounting information in such a way as to assist
management in the creation of policy and the day-to-day operation of an undertaking. Thus, it relates to the use of
accounting data collected with the help of financial accounting and cost accounting for the purpose of policy
formulation, planning, control and decision-making by the management.
Management accounting links management with accounting as any accounting information required for taking
managerial decisions is the subject matter of management accounting. Some leading definitions of Management
Accounting are given below:
Definitions: (i) According to R.N. Anthony, "Management Accounting is concerned with. accounting information
that is useful to management." (ii) According to [Link]. London "Management Accounting is the application of
professional knowledge and skill in the preparation of accounting information in such a way as to assist
management in the formulation of policies and in the planning and control of the operations of the undertaking."
From the above management accounting uses all techniques of financial accounting, cost accounting and statistics
to collect and process data for making it available to management so that it can take decisions in a scientific
manner.
Nature of Management Accounting
The following points may be noted in this respect:
i) Technique of Selective Nature: Management Accounting is a technique of selective nature. It takes into
consideration only that data from the income statement and position statement which is relevant and useful to the
management. Only that information is communicated to the management which is helpful for taking decisions on
various aspects of the business.
(ii) Provides Data and not the Decisions: The management accountant is not taking any decision but provides
data which is helpful to the management in decision-making. It can inform but cannot prescribe. It is just like a
map which guides the traveller where he will be if he travels in one direction or another. Much depends on the
efficiency and wisdom of the management for utilizing the information provided by the management accountant.
(iii) Concerned with Future: Management Accounting unlike the financial accounting deals with the forecast
with the future. It helps in planning the future because decisions are ‘always taken for the future course of action.
(iv) Analysis of different Variables: Management accounting helps in analyzing the reasons as to why the profit
or loss is as compared to the past period. Moreover, it tries to analyze the effect of different variables on the profits
and profitability of the concern.
(v) No Set Formats for Information: Management accounting will not provide information in a prescribed
proforma like that of financial accounting. It provides the information to the management in the form which may
before useful to the management in taking various decisions on the various aspects of the business.
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Unit-1 3. What do you understand by direct material? What is indirect material? Give examples.
For proper control and managerial decisions, management is to be provided with necessary data to analyze and
classify costs. For this purpose, the total cost is analyzed by elements of cost i.e., by the nature of expenses.
Strictly speaking, the elements of cost are three i.e., materials, labour and other expenses. These elements of cost
are further analyzed into different elements as illustrated in the following chart:

Elements of Cost: Materials >Labour > Other Expenses

Direct Direct Direct
Indirect Indirect Indirect
Overheads
Production or Administration Selling Distribution
works Overheads Overheads Overheads Overheads
Fig.: Elements of Costs
1. Direct Materials are those materials which can be identified in the product and can be conveniently measured
and directly charged to the product. Thus, these materials directly enter the production and form a part of the
finished product. For example, timber in furniture making, cloth in dress making and bricks in building a house. The
following are normally classified as direct materials: i. Raw materials (e.g., jute for gunny bags, pig iron in foundry).
ii. Materials bought for a specific job (e.g., glue for bookbinding). iii. Purchased/produced components (e.g.,
batteries for radios). iv. Primary packing materials (e.g., cartons, boxes for protection).
2. Labour engaged on the actual production of the product or carrying out of an operation or process.
Labour engaged in aiding the manufacture by way of supervision, maintenance, tools setting, transportation of
material etc. Includes: Workers engaged in actual production. Workers assisting manufacturing (supervision,
maintenance, transport). / Inspectors/analysts directly linked to production.
The wages paid to supervisors, inspectors, etc., though not direct labour, can be treated as direct labour if they are
directly engaged on specific product or process and the hours, they spend on it can be directly measured without
much of an effort. Similarly, where the cost is not significant like the wages of trainees or apprentices, their labour
though directly spent on a product is not treated as direct labour.
3. Direct (or Chargeable) Expenses. All expenses which can be identified to a particular cost centre and hence
directly charged to the centre are known as direct expenses. In other words, all expenses (other than direct
materials and direct labour) incurred specifically for a particular product, job, department etc. are called direct
expenses. These are directly charged to the product.
Examples: Royalty payments. / Excise duty. / Equipment hires charges for a specific job. / Experimental work costs
for a specific job. / Travel expenses related to a particular contract.
4. Overheads may be defined as the aggregate of the cost of indirect materials, indirect labour and such other
expenses including services as cannot conveniently be charged direct to specific cost units. Thus, overheads are all
expenses other than direct expenses.
In general terms, overheads comprise all expenses incurred for or in connection with the general organization of
the whole or part of the undertaking i.e., the cost of operating supplies and services used by the undertaking and
including the maintenance of capital assets. The main groups into which overheads may be sub-divided are i.
Manufacturing Overheads – Indirect costs of production (e.g., depreciation, insurance). ii. Administration
Overheads – Costs related to policymaking and management (e.g., office rent, legal expenses). iii. Selling
Overheads – Costs related to marketing and sales (e.g., advertising, sales commissions). iv. Distribution Overheads
– Costs incurred in delivering products to customers (e.g., transport, warehouse rent). v. Research and
Development Overheads – Costs of innovation and improvement (e.g., product development, testing).
Development cost is the cost of the process which begins with the implementation of the decision to produce a
new or improved method and ends with the commencement of formal production of that product or by that
method.
5. Indirect Costs
(1) Indirect Materials
Such materials refer to those materials which do not normally form a part of the finished product. It has been
defined as "materials which cannot be allocated but which can be apportioned to or absorbed by cost centres or
cost units". These are:
(a) Stores used in maintenance of machinery, building etc. like lubricants, cotton waste, bricks and cements.
(b) Stores used by the service departments i.e. non-productive departments like powerhouse, boiler house and
canteen etc.; and
(c) Materials which due to their cost being small, are not considered worthwhile to be treated as direct materials.

Unit-2
[Link] are Inter-process Profits? State the advantages and disadvantages of Inter process profits.
Meaning: The profits which result out with the transfer of goods from one process to other within the organization
is called inter-process profits. Usually, the finished goods are transferred to next process within the firm at a cost
calculated on the basis of the cost of production but in some firms which are based on process costing method, the
goods are transferred or output of one process and is transferred to succeeding process not at cost price buy at the
market price consisting of the margin or profit. This profit is called inter-process profits.
The price fixed for the transfer of goods from one process to other in an organization is called 'transfer price'.
Transfer Price = Cost Price + Margin
In other words, the difference between cost price and transfer price is called as "inter-process profit"
Therefore, Inter Process Profit - Transfer Price - Cost Price
The objective behind the transfer of goods at a margin are,
(i) To assess the performance and efficiency of the production processes.
(ii) To reduce the transfer of efficiency from one process to the other succeeding process.
Advantages
The following are the advantages of the inter-process profits,
(i) It helps in performance evaluation of each process of production.
(ii) It helps the management in taking make-buy decisions by comparing the cost of production with the market
price.
(iii) With the help of inter-process profits, it is quite easier to ascertain the profit or loss accurately and the
management can take timely actions to correct the inefficiencies or losses if any.
Disadvantages

(i) Inter-process profits should be deducted while valuing the closing stock, otherwise it would result in incorrect
balance sheet calculations.
(ii) Auditors or tax authorities would reject the records or accounts if there exists any problem or error in valuation
of closing stock.
(ii) This method consumes lots to time of calculate both transfer price and cost price of the closing stock.

Q3. Enumerate about Unit Costing.

Meaning: Unit costing is a method of costing by units of production and is adopted where production is uniform
and a continuous affair, units of output are identical, and the cost units are physical and natural. The cost per unit
is determined by dividing the total cost during a given period by the number of units produced during that period.
This method of costing is generally adopted where an undertaking is engaged in producing that period. This
method of costing is two or more products of the same kind but of varying grades or quality.
Features: Following are the characteristics features of the industries where unit costing is used: (i) Production
consists of a single product or a few products. (ii) Large number / quantity of identical units is produced with
identical costs. (iii) Production is more or less of standard quality. (iv) Production is performed on continuous basis.
(v) Cost units are physical and natural e.g. number of bricks, ton of cement, meters of cloth, litters of milk.

Unit-3
1. What is CVP Analysis? Explain the objectives and uses of CVP Analysis.
Meaning: Cost Volume Profit (C.V.P) analysis is a technique for studying the relationship between cost, volume and
profit. Profits of an undertaking depend upon many factors. But the most important of these factors are the cost of
manufacture, volume of sales and the selling prices of the products. But the most significant single factor in profit
planning of the average business is the relationship between the volume of business, costs and profits. The C.V.P
relationship is an important tool used for the profit planning.
When analyzing C.V.P it is seen that its three components’ costs, volume and profit are interconnected and
dependent on one another. Profit depends upon sales. Largely selling price depends upon cost and cost depends
upon volume of production. In C.V.P analysis an attempt is made to analyze the relationship between variations in
cost with variations in volume.
The C.V.P relationship is of great use to management as it assists in profit planning, cost control and decision
making. Cost-volume-profit analysis can be used to answer questions such as,
(a) At what volume of sales will the firm break-even?
(b) At what volume of sales will it earn desired profits?
(c) How will changes in cost or price effect profits?
(d)Which product/product mix mean the most profit?
(e) Which product/component should be manufactured and which should be bought?
Objectives
Following are the objectives of C.V.P analysis,
i). It helps to forecast profit accurately.
ii)It is useful in setting up flexible budgets which indicate costs at various levels of activity.
iii)It assists in evaluation of performance for the purpose of control.
iv) It also assists in formulating price policies by showing the effect of different price structures on costs and
profits.
v)It helps to know the amount of overhead costs to be charged to the products cost at various levels of operations.
Uses C.V.P analysis is a very important aid in the decision-making process of the management in almost all areas
as shown by the following,
1. Management can estimate the profit over different levels of volume with the help of C.V.P analysis which is
useful in preparing flexible budgets.
2. C.V.P analysis also helps the management in analyzing the impact of changes in the price on the profit position
of the company.
3. C.V.P analysis is also useful to the management in determining the BEP and the profits to be made to meet the
proposed expenditure.
4. C.V.P analysis is vital in pricing too. Modem economy is characterized with huge competition. In order to
maintain competitive edge, the company has to price its products competitively.

[Link] the major applications of Break-even analysis.

The following are the applications of break-even analysis,
1. Determination of Required Sales Volume to Produce Desired Operating Profit
Break-even analysis is used in identifying the sales volume which is required to produce the estimated amount of
profit.
Required sales = Fixed expenses + Desired operating profit /P/V ratio
If the management is interested in determining the sales volume which can generate the desired profit after taxes,
then they may the following formulae,
Required sales volume =Fixed cost + Desired income after taxes 1-Tax rate /P/V-ratio
2. Determination of Operating Profit
BEP is used in calculating the operating profit at a given level of sales volume by using the following formula:
Operating profit = [Actual Sales Revenue (ASR) - Break-even Sales Revenue (BESR)]'x P/V ratio.
3. Determination of the Effect on Operating Profit
BEP helps in determining the effect on operating profit of a given increase in sales volume, = [Budgeted Sales
Revenue (BSR) - Break-even sales revenue] ×
P/V ratio
4. Determination of Additional Sales Volume
BEP helps in calculating the additional sales volume required to offset a reduction in selling price. Based on market
survey, sales manager can suggest that due to increased competition in market and the liberal import policy of the
government, the price of the product is higher. To maintain same amount of profit and stay in competition, the
management must investigate new methods of sales potential.
Desired sales volume = FC+P/ Revised P/V ratio
Where EC=Fixed cost and
P = Profit.
5. Understanding the Effect of Changes in Fixed Costs
There may be a situation wherein firm needs to increase fixed costs which may be due to external factors like
increase in insurance rates, factory rent or due to some managerial decisions. When fixed cost increases it leads to
a rise in BEP of the firm.
6. Understanding the Effect of Changes in Variable Costs
When there is an increase in variable costs, then the desired sales volume to earn prevailing profit is also increased
and vice versa.
3. A manufacturer produces 1500 units of products annually. The marginal cost of each product is 960
and the product is sold for 1200. Fixed cost incurred by the company is 48,000 annually. Calculate P/V
Ratio and what would be the breakeven point in terms of output and in terms of sales value?
Given that
Marginal Cost (Variable Cost) Per Unit = 960
Fixed Cost = 48,000
Selling Price Per unit = 1,200
1. Calculation of P/V Ratio
P/V Ratio=
Contribution Sales P/V Ratio × 100
Contribution (per unit) = Selling Price Per Unit - Variable Cost or Marginal Cost Per Unit
= 1200-960
= 240
P/V Ratio=240/1200*100
P/V Ratio = 20%
2. Calculation of Break-even Point Terms of Output
Break-even Point (in units) =
Fixed Cost/Contribution Per Unit (OR)
Fixed Cost/Selling Price Per Unit-Variable Cost Per Unit
=40000/240 =200
[ Contribution per unit = 240]
Break-even point (in units) = 200
Calculation of Break-even Point in Terms of Sales Value
Break-even Point (in) =
Fixed Cost/P/V Ratio
=48000/20% [P/V Ratio = 20%]
=48000/20×100=2,40,000
Break-even point in terms of sales value is₹2,40,000

Unit-4
2.. Define Budgetary Control. Explain the features of Budgetary Control.
Meaning
CIMA has defined the terms 'budgetary control' as "Budgetary control is the establishment of budgets relating to
the responsibilities of executives of a policy and the continuous comparison of the actual with the budgeted results,
either to secure by individual action the objective of the policy or to provide a basis for its revision. "It is the system
of management control and accounting in which all the operations are forecasted and planned in advance to the
extent possible and the actual results compared with the forecasted and planned ones.
Budgetary Control Involves
(i) Establishment of budgets
(ii) Continuous comparison of actual with budgets for achievement of targets.
(iii) Revision of budgets after considering the changes in the circumstances.
(iv) Placing the responsibility for failure to achieve the budget targets.
Features
The salient features of such a system are the following:
1. Determining the objectives to be achieved, over the budget period, and the policy or policies that might be
adopted for the achievement of these ends.
2. Determining the variety of activities that should be undertaken, for the achievement of the objectives.
3. Drawing up a plan or a scheme of operation in respect of each class of activity, in physical as well as monetary
terms for the full budget period and its parts.
4. Laying out a system of comparison of actual performance by each person, section or department with the
relevant budget and determination of causes for the discrepancies, if any.
5. Ensuring that corrective action will be taken where Ere plan is not being achieved and, if that be not possible, for
the revision of the plan.

3. Briefly explain the various types of Budgets.

The budgets are usually classified according to their nature.
The following are the types of budgets which are commonly used,
(A) Classification According to Time
[Link] Term Budgets: The budgets are prepared to depict long term planning of the business. The period of
long-term budgets varies between five to ten years. The long-term planning is done by the top-level management;
it is not generally known to lower levels of management. Long time budgets are prepared for some sectors of the
concern such as capital expenditure, research and development, long term finances, etc. These bud-gets are useful
for those industries where gestation period is long i.e., machinery, electricity engineering, etc.
2. Short-term Budgets: These budgets are generally for one or two years and are in the form monetary terms.
The consumers goods industries like sugar, cotton, textile, etc. use short-term budgets
3. Current Budgets: The period of current budgets is generally of months and weeks. These budgets relate to the
current activities of the business. According to I.C.W.A. London, "Current budget is a budget which is established for
use over a short period of time and is related to cur-rent conditions."
(B) Classification based on Functions
1. Operating Budgets: These budgets relate to the different activities or operations of a firm. The number of
such budgets depends upon the size and nature of business. The commonly used operating budgets are:
(a) Sales Budget
(b) Production Budget
(c) Production Cost Budget.
(d) Purchase Budget
(e) Raw Material Budget
Labour Budget
(g) Plant Utilisation Budget
(h) Manufacturing Expenses or Works Overhead Budget
(i) Administrative and Selling Expenses, Budget, etc.
2. Financial Budgets: Financial budgets are con comedy with cash receipts and disbursements, working capital,
capital expenditure, financial position and results of business operations. The commonly used financial budgets
are:
(a) Cash Budget
(b) Working Capital Budget
(c) Capital Expenditure Budget
(d) Income Statement Budget
(e) Statement of Retained Earnings Budget
(f) Budgeted Balance Sheet or Position Statement Budget.
3. Master Budget: Various functional budgets are integrated into the master budget. This budget is pre-pared by
the ultimate integration of separate functional budgets.
According to I.C.W.A. London, "The Master Budget is the summary budget incorporating its functional budgets".
Master budget is prepared by the budget officer, and it remains with the top-level management. This budget is
used to co-ordinate the activities of various functional departments and to help as a control device.
(C) Classification based on Flexibility
[Link] Budget: The fixed budgets are prepared for a given level of activity; the budget is pre-pared before the
beginning of the financial year. If the financial year starts in January, then the budget will be prepared a month or
two earlier, i.e., November or December. The changes in expenditure arising out of the anticipated changes will not
be adjusted in the budget. There is a difference of about twelve months in the budget-ed and actual figures.
According to 1.C.W.A. London, "Fixed budget is a budget which is designed to remain unchanged irrespective of the
level of activity actually attained." Fixed budgets are suitable under static conditions. If sales, expenses and costs
can be forecasted with greater accuracy then this budget can be advantageously used.
Merits
(i) Very simple to understand
(ii) Less time consuming
Demerits
(i) It is misleading. A poor performance may remain undetected, and a good performance may go unrealised.
(i) It is not suitable for a long period.
(iii)It is also found unsuitable particularly when the business conditions are changing constantly.
(iv) Accurate estimates are not possible.
2 Flexible Budgets: A flexible budget consists of a series of budgets for different level of activity. It therefore,
varies with the level of activity attained. A flexible budget is prepared after taking into consideration unforeseen
changes in the conditions of the business. A flexible budget is defined as a budget which by recognising the
difference between fixed, semi-fixed and variable cost is de-signed to change in relation to the level of activity.
Merits
(i)With the help of flexible budget, the sales, costs and profit may be calculated easily by the business at various
levels of production capacity.
(ii)In flexible budget, adjustment is very simple according to change in business conditions.
(iii) It also helps in determination of production level as it shows budgeted costs with classification at various levels
of activity along with sales. Hence the management can easily select the level of production which shows the profit
predetermined by the owners of the business.
(iv) It also shows the quantity of product to be produced to earn determined profit.
Demerits
(1) The formulation of flexible budget is possible only when there is a proper accounting system maintained,
perfect knowledge about the factors of production and various business circumstances is available.
(ii) Flexible Budget also requires the system of standard costing in business.
(iii) It is very expensive and labour oriented.
Unit-5
[Link] the advantages and limitations of Standard Costing.
Advantages
1)Proper Planning
It helps to apply the principle of "Management by exception". That is, the management need not worry over those
activities which proceed in tandem plans. It is only on the issues of exceptions that they have to concentrate.
ii)Efficient Cost Control
Standard Costing is a tool for the management to gain reduction in the cost and control over it. Under this
technique, differences are analyzed, and responsibilities are determined.
iii) Motivational Factor
Labour efficiency is promoted, and they are destined to be cost conscious. Standards provide incentives and
motivation to work with greater effort. This increases efficiency and productivity.
iv)Comparison of Forecasting and Outcome
A target of efficiency is set for the employees, and the cost consciousness is stimulated. Since the process of
standard costing allows an appraisal to be made of personnel, machines and methods of working, current
inefficiencies come to the notice and get eliminated.
v)Inventory Control
Standard costing facilitates inventory control and simplifies inventory valuations. This ensures uniform pricing of
stocks in the form of raw materials, work in progress and finished goods.
vi)Economical System
Standard costing system is an economical system from the viewpoint that it does not require detailed records. It
also does not require a big staff. It results in the reduction in paper work in accounting and needs very few records.
Thus, there is a saving of time as well as money.
vii) Helpful in Budgeting
Budgets are prepared based on standard costing. Standards which are set up in respect of materials, labour and
overheads, are helpful in preparing various budgets. For example, flexible budget, sales budget, etc.
viii) Helps Formulate Policies
This technique is a valuable aid to the management in determining prices and formulating production policies.
Standard costing equips cost estimates while planning the production of new products.
ix)Helps Distinguish Activities
Standard costing helps in distinguishing between skilled and unskilled activities. So the skilled worker only pays
attention to improving the activities of the unskilled workers.
x)Eliminates Wastage
Through fixing standards, certain waste such as material wastage, idle time, lost machine hours, etc. are reduced.
Limitations
i)Costly System: Because the Standard Costing requires highly skilful and competent personnel, it becomes a costly
system too. For the same experts are paid high remuneration.
ii)Difficulties in Fixation of Standard: It is always difficult to determine precise standard costs in a given situation
which will coincide with actual cost when operations are over. Standard costs are determined partly by the
experience and partly by the cost projections based on advanced statistical techniques. Thus, uncertainties revolve
around standards.
iv)Consistency of Standard: because the standards of marginal costing fluctuate and vary from time to time, it is
difficult to always sustain and continue the same standards.
v)Unsuitable for Non standardised Products: Standard costing is expensive and unsuitable for job manufacturing
industries as they manufacture non standardized products such as catering, tailoring, printing, etc.
vi)Relatively Fixed Standards: A business may not be able to keep standards up to date. In other words, a business
may not revise standards to keep pace with the frequent changes in manufacturing conditions. Firms may avoid
revising standards as it is a costly affair.
vii) Difficulties for Small Industries: Establishment of standards and their implementation involve initial high costs.
Standards have to be revised, and new standards will be fixed involving larger costs. Thus, small firms find it
expensive to operate a standard costing system. This system is not fit for each type of industry.
viii) Discouragement for Workers: Sometimes the employees and workers are discouraged when the standards are
fixed at a high level. The unreal high standards may be adverse by effect the morale of workers rather than
working as an incentive for better efficiency.
ix)Inaccurate Diverse Results: Inaccurate and unreliable standards cause misleading results and thus may not
enjoy the confidence of the users of this system.

2. How is Sales Variance computed based on profit method?

Sales margin variance is the difference between the profit as per the original budget and the actual profit achieved.
The total profit variance is the sum of all the subsidiary variances which have been produced.
It represents the difference between actual margin (difference between standard cost and the realization from
actual sales) and standard margins appropriate to the quantity of sales budgeted.
For determining whether variances are adverse or favourable, the approach will be exactly the opposite of what it
was in the case of cost variance. In sales margin variances, if the preceding step is less than the following step, it
will be a case of adverse variance.
Alternatively, if the preceding step is more than following step, it will be cause of favourable variance. This point
should be carefully remembered to avoid confusion. This will hold good for sale value variance also.
(a) Sales Margin Price Variance (SMPV)
It is that portion of sales margin variance which is due to difference between actual price and standard price of
actual sales effected. Sometimes, it is necessary to adopt the selling price of the product of changing market
condition by raising or lowering the prices. In these cases, it is especially desirable to segregate sales margin price
variance from sales margin volume variance.
(b) Sales Margin Mix Variance (SMMV)
It is that portion of sales margin volume variance which is due to change in actual sales mix and budgeted sales
mix. It arises because actual sales mix does not always remain constant. It has to be changed due to changing
market conditions, i.e., national or internal conditions or management policies.
(c) Sales Margin Quantity Variance
Sales margin quantity variance can be computed by deducting budgeted sales quantity from the standard actual
sales quantity.
Conditions
i)Standard sales margin on actual sales is affected, if the sales had been in the ratio of standard mix, and
ii) If standard sales margin has to be calculated on standard sales mix or budgeted sales margin for the sales as
per budget.
(d) Profit Variance Due to Sales
Profit variance due to sales is calculated by determining the variations between the budgeted profits and the actual
profits.
Profit variance due to sales =
Actual profit - Budgeted profit
OR
Profit variance due to sales = Actual sales x Actual profit/unit - Budgeted sales x Budgeted profit/unit
OR
Profit variance due to sales = Sales volume profit variance - Selling price variance
If the actual profit is higher than the budgeted profits, then the condition is said to be 'favourable'.
(ii) If the actual profits are less than the budgeted profits, then the condition is said to be "adverse".
Budgeted Profits > Actual Profit =>Adverse Budgeted Profits < Actual Profits => Favourable
(e) Sales Volume Profit Variance
It is a part of profit variance due to sales and is to be calculated separately for each product. It is determined by:
Computing difference between the actual volume of sales and the budgeted volume of sales. This variance Jas
emphasized:
On determining the efficiency of the sales department of a firm.
Sales volume profit variance = Standard profit/unit x
[Budgeted quantity - Actual quantity]
Whereas.
Standard Profit/unit = Standard Selling Price/unit-Standard Cost per unit
(i) If budgeted volume of sales is higher than actual sales, then the condition is said to be "adverse".
(ii) If actual sales volume is higher than the budgeted sale volume, then the difference is said to be "favourable
variance".

[Link]
Ans
Standard Fixed Overhead Rate per unit
=
Budgeted Overhead (Fixed)/ Budgeted Output
=3,00,000 /15,000 =₹20.

Standard Variable Overhead Rate per unit=

Budgeted Overhead (Variable)/ Budgeted Output
= (4, 50000)/15000 = 830
Standard Production per day
=
Output (Budgeted) /
No. of days (budgeted)
=15,000/ 25 = 600 units
Standard Fixed Overhead Per day
= Standard production per day x Standard fixed overhead rate per unit = 600 * 20 = 12000
Variable Overhead Cost Variance
[(Actual output x Standard variable overhead rate per unit) - Actual variable overhead]
=16000 * 5/100 = 80
Add: Actual = 16000/(16, 800)
= [(16, 800 * 30) - 4, 70000]
= 5 ,04,000-4,70,000 = 34000(F)
Note: 16800 is taken because there is 5% increase in output.
Fixed Overhead Cost Variance
= [(Actual output x Standard fixed overhead rate per unit) - Actual fixed overhead)
= [(16, 800 * 20) - 3, 5000]
= 3 ,36,000-3,05,000 = 31000(F)
Fixed Overhead Expenditure/Budget Variance
= Budgeted overhead - Actual overhead
= 3,00,000-3,05,000
= 5000(A)
Fixed Overhead Volume Variance
= [(Budgeted output - Actual output) x Standard overhead rate per unit]
= [(15000 - 16, 800) * 20]
= 36000(A)
Total Overhead Cost Variance
= Standard overhead charged to production - Actual overhead incurred
= [16, 800(30 + 20)] - [3, 5000 + 4, 70000]
= 8,40,000-7,75,000
= 65000(F)
Overhead Calendar Variance
= (Budgeted working days - actual working days x Standard fixed overhead rate per day)
= (25 - 27) * (3,00,000)/25
= 24000(A)