( Standard Costing Introduction ; ; ——~The word standard means systematic rules or norms which are fixed to achieve a given objective. It is considered as a pre-determined cost. It is also known as target costs. Thus, Standard Costing is a special method to control systems like process costing, job costing or marginal costing. Standard Cost “vg, Mccording to Chartered Institute of Management Accountants (CIMA), UK, “Standard Cost is the pre-determined cost based on technical estimates for materials, labour and overhead for a selected period of time for a prescribed set of working conditions”. Standard Costing CIMA has defined standard costing as, “the preparation of standard costs and applying them to measure the variations from actual costs and analysing the causes of variations with a view to maintain maximum efficiency in production”, Thus standard cost is defined as a pre-determined calculation of how much costs should be under specified working conditions. S Purposes of Standard Costing The purpose of standard costing are listed as follows: a) It helps in measuring the performance of the work done. b) Its main purpose is to control cost and reduce it. ©) It aims at simplifying the costing procedures, d) It helps in the valuation of inventories. ©) — Ithelps in setting selling prices. Advantages of Standard Costing System a) This system is the yardstick for(measurement of performance again: b) It helps to set standards and to achieve the given standard set. Thus it helps in planning. ©) — It is good cost control systom/It helps in reduction of cost)BF gonctare Contig Thin ayAtom Nope te 4 © Whelpain Oxing oman” 0 tin cont effective. ® tplaye a major role Metoney ar Productivity Coon price An any) 1) Thin avaton fnciitaton mua MMe AML expen a : focuned on thono expendite emeneb n Y exception thi y rman lituro and set Ption thus, management's attention is : ity Which indicate high favournble or adverse i) Standard costing can be ) By fixing standards, cor cost, machine work; “sed as an nid to budgeting, » certain wastes a ing hours ete, a: pisadvantages of Standard Costing a) This system is not accurate sin db) Ifwrong standards ar business, ‘uch as material losses or wastages, idletime, re reduced to the minimum. ice future cannot be exactly predicted. © adopted it leads to more harm than being beneficial to the z 7 eae and small firms cannot afford it. he workers or the system operations prevailing i ; are prevail th ti t be capable of operiting the eyo ‘ling in the organisation may not setting of Standard Cost Before setting standard costs, the following factors are to be satisfied: a) Organisation chart should be prepared which should depict the lines of authority and responsibility. b) Cost Centres for manufacturing and service areas should be clearly defined. ©) There should be accountability wherein each expense should be identified by function and a person should be made responsible for such expense. Standard costs are set for each element of cost namely: a) Direct Materials b) Direct Labour and c) Overheads Setting Standard for Materials First standard should be set for stand product while dealing with standard quantity, specified with reference to the specification or grace. take care of likely fluctuation of price during the perio Setting Standards for Direct Labour Standards should be set for different grades of Labour ea ee Products, It should be made possible to establish the tabour ae ah labour at the standard rates per hour set by the personnel depa ’ dard quantities of materials required for each the quality of the material also has to be de. At the same time standard price should \d, the orders placed etc. production of various Juating the grades ofJ Techniques of Cont Accounting 188 Mothode Sotting Standards for Overhonds The v the cost per unit or cost pe nusry to conside; nce it in nec onl riable overhead change from period to period I nly hour: c ixed cout. are cha satment of fixed cont. If fixed ' erao cost, Direct cont ayntem on the other period in whic Costing system varies according to the t to operation. the system is known as absorption oF total cost, Dirhe hand regands fixed cost as a charge to Profit & Loss account for the period ti is incurred, When standard cost concept is applied, the system may be bsorption cost system or standard direct cost system. the same either standard Differences between Standard Costing and Budgetary Control The following differences between Standard Costing and Budgetary Control rent 1) The scope for budgetary control is wider than that of standard costing. 2) Standard Costing is the complete and detailed analysis of variances Thus it is intensive in nature. But budgetary control is extensive in nature, ; 3) Standard costing gives importance to the available accounting information whereas budgetary control not only gives importance to actual but also gives importance to estimates, 4) Standard Costing is a better control device than the budgetary control. 5) Standard Costing is based mostly on information available from cost accounts whereas budget is based mostly on information available from financial accounts, Variance Analysis Variance is the difference between standard cost and the actual cost incurred during a given period of time. According to CIMA, Variance analysis is “the resolution into constituent Parts and the explanation of variances”. When actual cost is less than standard cost, the difference is called favourable variance. When actual costs exceed standard cost, the difference is called adverse or unfavourable variance. Variance analysis is the basis of Cost Control under Standard Costing System. Variances are analysed and reasons are established for taking necessary corrective action. Such analysis leads to cost reduction as well as. revision of standards. The variance analysis helps to pinpoint responsibilities to the managers, who can exercise the technique of management by exception. They concentrate only on those expenses where variances are significant, leaving other, expense areas which confirm to standards, Variance can be divided into two groups one, which arises ont of usage or volume and one which arises out of price. Details of variances are: @ Direct Material Variance (ii) Direct Wages Variance (iii) Overhead Variance Note: As per the syllabus only Material Variance and Labour variance is to be studied. -ndard Costing gia! gement Wise 18: Direct material cost vari ° “ ae via xceirect material and the mance at be defined ponent Mal cost of qos Me difference between the standard ¢ standard cust irect: materi T e eri i ial used. This variance has thre ‘ rial Price Vari; (i Variance * ariance (jj) Material U; lsage Vari | Price i iii water seers pene ii) Material Cost Variance rice Varian ype standard price. ice may be defined as the diff sotaral Price Vestanc = ag ifference between the actual price and = Actual 1 Quantit; MPV = AQ x (Sp_ a) x (Standard Price — Actual Price) waterial Usage Variance It is the difference betw: F een the actual i Hy a oo have been consumo caamtty for material consumed and the standard ateri: sage Variance= S| P = Standard Pri r i ee ee ‘ (Standard Quantity — Actual Quantity) Material Cost Variance Material Cost Variance= Standard Cost - Actual Cost st whe MCV = (SQ x SP) - (AQ x AP) re, Standard Cost = Standard Quantity x Standard Price Actual Cost = Actual Quantity x Actual Price quant Illustration - 1 From the following information calculate. Material Cost Variance separately for P& Q Material | Standard Quantity Standard Price| Actual Quantity | Actual Price Kg £ Kg z P 20 2 25 25 Q 30 3 35 2.75 Solution: Material Cost Variance = Standard Cost — Actual Cost Where, Standard Cost = Standard Quantity x Standard Price. Actual Cost = Actual Quantity x Actual Price. (SQ x SP) - (AQ x AP) Material Cost Variance = Material P = (20 x 2) @5* 2.5) = 40 62.50 = © 22.60 (Adverse) Material @ = (30 x 3) ~ G5 * 2.75) = % 6.25 (Adverse) 90 - 96.25Mothoda and Techniquen of Cont Accounting 190 tration — 2 A product Z requires 26 units of standard matoriala at fra aa ofS 6 por unit, The actual consumption of material for the manufacturing: of | uct C nite of material at the rate of 4 per unit Calculate Material Price Variance. Solution: ; Material Price Variance = Actual Quantity x (Standard Price — Actual Price) = AQ x (SP - AP) Material Price Variance for Z = 20(5-4) = %20 (Favourable). Illustration - 3 ; The standard quantity and standard price of raw material required for one unit of product Z are given as follows. Standard Price Quantity Material A 2 Kes % 2 per unit Material B 6 Kgs @4 per unit , The actual production and relevant data are as follows: Output 500 units of product Z, Quantity Total Cost Material A 1,200 Kgs = 3,400 Material B 1,600 Kgs = 3,900 Calculate Material Usage Variance. Solution: Material Usage Variance = Standard Price x (Standard Quantity — Actual Quantity) Standard Quantity for A = 500 units x 2 = 1000 units. Standard Quantity for B = 500 units x 6 = 3000 units. Material Usage Variance = SP x (SQ - AQ) A = 2(1000-1200) = % 400 (Adverse) B = 4(8000— 1600) = 4x 1400 = %5,600 Favourable). Causes of Material Price Variance The causes for material price variance are listed below: 1) Changes in the market conditions. 2) Buying in smaller quantities at frequent intervals. 3) Cash discount not taken by the customers. 4) Transportation charges absorbed instead of being charged to the suppliers. Causes of Material Usage Variance 1. Due to wastage 2. Spoilage 3. Carelessness 4. Pilferage 5. Wastage 6. Sub-standard materials.y a adard Costing a 191 Thus it may be not ed a organisation materials may Se depending on the method of accounting employed by an sued from the stores either at actual price or at standard price jlustration ~ 4 The standard material fone unit of product R is See cost per Kg of material required for the production Material 10 Kes Standard price —% 4 per Kg. The actual production and rel va: Peeper mien ated material data are as follows: Material used 3000 Kgs. Price of material % 5 per Kg. Calculate: (a) Material Cost Variance (b) Material Usage Variance © Material Price Variance. Solution: (@) Material Cost Variance = (SQ x SP) ~ (AQ x AP) Standard Quantity = 10 Kgs x 500 units = 5000 units. Material Cost Variance = (5000 x 4) - (3000 x 5) = 20,000-15,000 = % 5,000 (favourable) (&) Material Usage Variance = SP (SQ - 4@) = 4(6,000 — 3,000) = 4x 2,000 = %8,000 (favourable). \Q x (SP - AP) = 3,000 x (4-5) = © 3,000 (Adverse). The Material Usage Variance can be sub-divided into two component namely — 1) Material Mix Variance and 2) Material Yield Variance (© Material Price Variance Material Mix Variance Material Mix Variance is that portion of the direct material usage variance which is the difference between the actual quantities of ingredients used when mixed at standard price and the total quantity of ingredients used at the weighted average price per unit of ingredients as shown by the standard cost sheets. The mix variance arises because of changing the proportion in which the different ingredients in the mixture are ‘combined to produce a given product. Scarcity of one ingredient for example may necesitate using a different ingredient in larger quantities. Material Mix Variance = Standard Price x (Revised Standard Proportion of ‘Actual Input — Actual Proportion)1 of Cont Acc Anniv mu Mothoda and Mustration — 5 Calculate the matorial mix variance from the following data Particulars Standard Actual Material A SOK OTS — AO Kn @EO Material # BO KS @ EG AO KM EB 80 Kes 80 Kes Solution: The material mix variance can be determined by comput the qnatorial w nces for each of the ingredients at standard rates and adding them up. Thus: Material A ~% 5 (60 ~ 40) = % 50 (Favourable). Material B —@ 6 (80 ~ 40) = % 60 (Adverse) Material Mix Variance =%10 (Advi se) Illustration ~ 6 1 mix variance From the information given below, compute the materi Particulars Standard Actual R 40 Kgs @ @ 50 per kg 50 Kgs @ % 50 per kg s 60 Kgs@% 40 perkg GO Kgs @ % 45 per kg. 100 Kgs 110 Kgs Solution: Material Mix Variance = Standard Price x (Revised Standard Proportion of actual input — Actual Proportion) Revised Standard proportion of actual input is calculated as follows: Standard Mix Revised Standard proportion = pa aad GEE x Total Actual Input R= AO xtt0=44 units S = wx 110 =66 units Material Mix Variance of R = (44-50) « 50 = % 300 (Adverse) S = (66-60) x 40 = x 240 (Favourable) Total Material Mix Variance = % 60 (Adverse) Material Yield Variance It is that portion of the direct material usage which is the difference between the standard cost of the production achieved whether completed or not and the netual cost of that production arrived at by multiplying the actual cost of that production, avrived at by the weighted average price per unit as shown by the standard cost sheet,192 Methods and Techniques of Cost Accounting Illustration - 6 Calculate the material mix variance from the following data: Particulars Standard Actual Material A 50 Kgs@%5 40 Kes @ 6 Material B 30 Kgs @76 40 Kgs @75 80 Kgs 80 Kgs Solution: The material mix variance can be determined by computing the material usage variances for each of the ingredients at standard rates and adding them up. Thus: Material A ~% 5 (50 — 40) 50 (Favourable). Material B -% 6 (30 — 40) 60 (Adverse) Material Mix Variance = 10 (Adverse) Illustration - 6 From the information given below, compute the material mix variance . Particulars Standard Actual R 40 Kes@%50perkg 50 Kes @¥ 50 per kg s 60 Kgs@@ 40 perkg 60 Kgs @ ¥ 45 per kg 100 Kgs 110 Kgs Solution: Material Mix Variance = Standard Price x (Revised Standard Proportion of actual input — Actual Proportion) Revised Standard proportion of actual input is calculated as follows: Standard Mix Tot: 1 Total Standard input“ 1°t@! Actual Input Revised Standard proportion = 40 10-44 units R= 00 S = 110 =66 units Material Mix Variance of R = (44-50) x 50 = % 300 (Adverse) S = (66-60) x 40 = % 240 (Favourable) Total Material Mix Variance = % 60 (Adverse) Material Yield Variance It is that portion of the direct material usage which is the difference between the standard cost of the production achieved whether completed or not and the actual cost of that production arrived at by multiplying the actual cost of that production, arrived at by the weighted average price per unit as shown by the standard cost sheet.Standard Costing 193 ‘The yield variance ari dl «0 arises because of the difference betwee! e and the actual yield obtained. lly due 10 abyno the atandard yield specified qualitative difference in input such as dampness in the material nal losien in production Material Yie Material Yield Variance = (Actual Loss on ‘Actual Input — Standard Lon on Actual Input) « Average Standard Price per Unit Where Average Standard Price Per Unit = = cont = Standard Outpu Illustration ~ 7 Calculate material yield variance from the information given below: Particulars Standard _| ‘Actual Material X 200 Kgs @ % 5 =% 1000 200 Kye @ 75 =% 1000 Material Y 500 Kgs @ & 3 =% 1500 500 Kgs @ % 3 = 1500 700 Kgs 700 Kgs Jiess: Wastage 75 Kes 100 Kes, 625 Kegs = 2,500 600 Kes 2 2,500 s Solution: Material Yield Variance = (Actual Loss on Actual Input — Standard Loss on Actual Input) x Average Standard Price Per Unit ‘Total Cost 2500 . , = : ‘Average Standard Price Per Unit = Standard Output Output ~ on 24 per unit . Material Yield Variance = (100-75) x 4 = 100 (Adverse) Jllustration - & ) Given the following information calculate — dD Material-Cost Variance 2) Material Price Variance 3) Material Mix Variance 4) Material Usage Variance and 5) Material Yield Variance ‘Material ‘Standard ‘Actual Qty Rate Amt Qty Rate Amt Xx 500 5 2,500 300 5 1,500 Y 400 4 1,600 600 4 2,400 Z 300 3 900 400 3 1,200 |___ = _ os 7,200 7,300 Less: 10% Normal Loss 120 ‘Actual Loss. 220 1,080 5,000 1,080 5,100 Solution:Mothoatn nit ool of Com Aerentatiny 194 Material € r tal Coot v 0 ndlavd Cont = Act Maren cone (SQ 81) (AQ AID Matorial Y= (600 x 6) = GlOO 6) + 2,600 — 1,600 © © 1000 (favourable Y = 1,600 00 = T HOO (nd Z = 900— 1,200 © © 100 (nilve i = diverno, + ‘Total Material Cost Variance ee vera) 2 Material Price Varinne AQ (SP = Material X 300 (6 = 6) =0 Y = GOO(4-4)=0 Z = 400 (3 = 3) renee een enectlo Total material price variance ; / por = rd Price (Revinod Standard Mix of ax ial Mix Variance = Standard Price (Rovined ix Of nets 9% Material Mis Actual Mix) «l input | Standard Mix . = Tom Su «Total actions: Revised Standard Mix of actual input = aoo5 Standard input” Tot actual input 500 X= 200 * 1300 = 541.67 Kyo y Ford * 1,300 = 433.33 Kye Ze aa * 1,800 = 325 Kyo : Material Mix Variance Material X = 5 (641.67 — 300) = z 1208.35 (Favourable) Y= 4433.33 ~ 600) = x 666,68 (Adverse) Z= 3 (825-400) =z 995 (Adverse) Total = € 816.67 (favourable) 4) Material Usage Variance = Standard Price Gtandard Quantity ~ Actual Quantity Material X = 5 (500-300) = z 1000 (Favourable) Y = 4 (400-600) = z 800 (Adverse) Z= 3 (300 - 400) = z 300 (Adverse), E2800 (Adverse), Total = % 100 (Adverse), 5) Material Yield Variance = Average Standard price per unit x (Standard Lowa on Actual Input — Actual Loss) Total Standard Cost Average Standard Price = 5000 Total Stand pO = 200 = Rs, 4.68 i Total Standard Output. ~ Tog9 = B* Per unl = 4.63 (130 ~ 220) = 2 416.70 (Adverse) Material Yield Variancegnandant Coating 195 pirect Wagon Cont ‘Whe ICMA torniyy aambant direct wagon, Feat direct wagon ine Labour Cont Varinneg. « Labour Cont Vary Varinnon KY define ‘fod fy \ Wing ’ Fe ce labour Cont varinnen an “the differenen between the "© Production achieved whether completed or not and *Standy Neo = Mad Labour Coat of actunl Output — Actual Labour Coat SCL ACG fe ‘ = Standara Cont ; = Act M z (s Ss (AH » AR) SH s Stand, ts lard ww ‘d Hourg tandard Rate AH Actual Hours AR = Actual Rate, e Iustration ~ 9 Calculate Labour Cost Va ariance wit Actual Rate —% 4 pe aa ¥ hour Actual Hours ~ 16,000 hours Actual Production — 1,200 Units Standard Rate —% 4.60 per hour Standard hours per unit — 20, he information given below: Solution: Labour Cost Variance = (Standard Hours for actual output x Standard Rate) ~ (Actual Hours x Actual Rate) (1,200 x 20) x 4.60) - (16,000 x 4) 1,10,400 — 64,000 2 46,400 (Favourable) " " Direct Wages Cost Variance is broken down into two components namely- a) Direct Wages Rate Variance and b) Direct Wages Efficiency Variance. Direct Wages Rate Variance i i i “that portion of the The ICMA terminology defines the direct wages rate variance as Direct Wages Cost Variance, which is due to the difference between the standard rate of pay "pecified and the actual rate paid”. Direct Actual Rate = Actual Hours x (Standard Rate — Actual Rate)194 ) 2) 38) 4 Methods and ‘Techniques of Cont Accounting Material Cost Variance = Standard Coat — Actual Cost (SQ x SP) - (AQ x AP) (600 x 5) — (300 x 5) Material J 2,500 ~ 1,600 = % 1000 (favourable) Y = 1,600 - 2,400 = % 800 (adverse) Z = 900 - 1,200 = % 300 (adverse) Total Material Cost Variance = % 100 (Adverse) Material Price Variance = AQ (SP - AP) Material X = 300 (5 - 5) Y = 600 (4-4)=0 Z = 400(3-3)=0 Total material price variance = 0 Material Mix Variance = Standard Price (Revised Standard Mix of actuel input — Actual Mix) 0 Standard Mix Revised Standard Mix of actual input = erat Standard input x Total actual input 500 = x = 541.67 Ky x 7200 1,300 eS 400 = x = 433.38 K {299 * 1300 = 433.33 Kgs 300 _ 2% = sopp * 1800 = 325 Kes : Material Mix Variance Material X = 5 (541.67 - 300) = % 1208.35 (Favourable) Y = 4 (483.33 - 600) = € 666.68 (Adverse) Z = 3 (825-400) —_ = % 225 (Adverse) Total = % 316.67 (favourable.) " Material Usage Variance = Standard Price (Standard Quantity — Actual Quantity) Material X = 5 (600~ 300) = % 1000 (Favourable) Y = 4 (400-600) = % 800 (Adverse) Zea 3 (300 - 400) = % 300 (Adverse). Total = % 100 (Adverse). Material Yield Variance = Average Standard price per unit x (Standard Loss on Actual Input — Actual Loss) ‘Total Standard Cost_ __ 5000 Total Standard Output ~ 1080 Material Yield Variance = 4.63 (130 — 220) = 416.70 (Adverse) Average Standard Price = =Rs. 4.63 per unitStandard Conting Direct Wages Cost ‘The ICMA torm standard direct way actual direct wagon ing Labour Cont, Vari ANCE or Labour Cont Varian Variance differe inology definen direct labour Cont. variance 1s “th completed or not and ed for the production achieved whethe Standard Labour Cont of actual Output ~ Actual Labour Cost iC — AC SC = Standard Cont AC Actual Cost or Labour Cost Variance (SH % SR) — (AH » AR) SH = Standard Houre SR = Standard Rate AH = Actual Hours AR. = Actual Rate. fllustration — 9 Calculate Labour Cost Variance with the information given below: Actual Rate — 7 4 per hour Actual Hours ~ 16,000 hours Actual Production — 1,200 units Standard Rate —% 4.60 per hour Standard hours per unit - 20. Solution: Labour Cost Variance = (Standard Hours for actual output x Standard Rate) — (Actual Hours « Actual Rate) (1,200 x 20) x 4.60) — (16,000 x 4) 1,10,400 — 64,000 % 46,400 (Favourable) " Direct Wages Cost Variance is broken down into two components namely- a) Direct Wages Rate Variance and b) Direct Wages Efficiency Variance. s Rate Variance ; . ; th er terminology defines the direct wages rate variance as ‘that portion of the e Direct Wi Cost Variance which is due to the difference between the standard rate of pa! irect Wages , whicl specified and the actual rate paid”. Direct Actual Rate = Actual Hours « (Standard Rate — Actual Rate) i= ‘Tochniquen of Cont Avy 196 Mothoda and Techniq amt Accounyy Muntration — 49 ee MA sr article, the wtandard direct tabauy Wicd neg RAMI Ltd manufactures a particular arti op 120 por unit Tspe of work X Hours wen bow wo y 30 2 a a iene. During a period, 110 wala of the article were manufactured, the actual labogy cont of Which wan an follows: Type of workers Hours Fate at * 7 i a 5 4,000 ; eon 7 2,000 6,000 = Caleulate Labour Rae Variance. Solution: X = 4,000 (3-2) = % 4,000 (Favourable) ¥ = 2,000 (2~ 8) = % 2,000 (Adverse) Total Labour Rate Variance = € 2,000 (Favourable) Direct Wages Efficiency Variance — The ICMA terminology defines the Direct Wages Efficiency Variance as “that portion of Mae direct wages cost variance which in the difference between the standard direct wages oost or the production achieved, whether completed or not, and the actual hours at standard rates (Plus incentive bonus if any)”, Direct Wages Efficiency Variance Standard Rate x (Standard Time for actual Out put ~ Actual Time) Direct Wages Efficiency Variance = SR (ST ~ AT) Or, Illustration — 11 Sri Shanmugam & Sons Purnishes you the following data Compute Labour Efficiency Variance, Standard labour hours unit 50 hours Standard labour rate per hour z4 Actual production 100 units Actual labour rate per unit m5 Actual labour for production 4,000 hours Solution: = 100 units x 50 = 5,000 hours = 4(5,000 — 4,000) Standard Time Labour Efficiency Variance = SR (ST — A7) = % 4,000 (favourable)srandard Conting 497 causes of wage rate vari D Change in bang ne? May be due to the following factors: 9 Me wing ate 2) : ople of differe 3) Exconnive Ove tifferent grades than anticipats causes of Labour Etficiene 1) Defective equi pe! 2) Bad Supervision” O78 and movarial Y Variances 3) Poor working conditions 4) Dissatisfaction amo, 5) Production Delays 6) Instruction not avail, 7) Bad workmanship ng the workers lable at appropriate times jassification of ich Fi cl ene oa Labour Efficiency Variance ‘ ‘urther divided into following: i) Idle Time Variance ii) Labour Mix Variance iii) Labour Yield Variance i) Idle Time Variance This variance arises whenever there is an abnormal idle time caused by power failure, machine breakdown etc. This variance will always be unfavourable. It is calculated as follows: Idle Time Variance = Idle hours x Standard Rate per hour Illustration - 12 100 workers are working in a factory at a standard wage rate of ¢ 4.80 per hour. The standard performance is set at 360 units per hour. The actual production was 56,000 units. ‘There was a power failure which stopped production for 2 hours. Calculate idle time variance. Solution: Idle time variance = Idle hours x Standard Rate per hour Idle hours = 100 workers @2 hrs = 200 hrs Idle time variance = 200 hrs x 4.80 = % 960 Adverse ii) Labour Mix Variance or Gang Composition Variance This is similar to the material mix variance and arises because of a change in the opposition of the work force. This may arise when skilled labour is made to do the job normally done by unskilled labour. Labour Mix Variance = Standard Rate x (Revised Standard hours — Actual Hours) Std. hours of the grade x ual hi Total Standard hours ~ /°t#! actual hours Where Revised standard hours =hy — 2 Motheste and Techniques of Coat 4, Pn ass ting Iustration = 18 cate A& Bworker the atandart direct tay, A reputed firm gives the detail OE Ere y below 7 to og ited ‘ Mie are giver Below: ____ ed sehich an BOO por wannt, The details aes ENS TAmount(y —~ a8 £100 pe Rate | Grade of worke! 2.5 62.50 —_a TI = 2 40.00 B = ~[__102.50 srodticed. the actual During a period SO unit of the product were P belo abour cost hich are as follows, awk Fours [Rate (9 [Amount(o Grade of workers = Grete of 3.000 2 S000 7 1.600 8 iu) 4.600 an.s00) Calculate Labour Mix Variance. Solution: Labour Mix Variance sed Standard Hours ~ Actual Hour) = Standard Rate s (Revi Standard hours of the rade. ‘Total Actual Hours Total Standard hours Revised Standard Hours Standard hours of the Grade 25x S0= 2 0 x SO= 1,600 Total Revised Standard hours: Grade A 1600 = =— x 4600 = 2, hrs. Grade B 3600 044 hrs. Labour Mix Variance Grade A 5 (2,556 — 3,000) = 1110 (Adverse) B = 2 (2,044— 1,600) = 88S (Favourable) 222 (Adverse) Total Labour Mix Variance Labour Yield Variance This variance is similar to Material Yield Variance. This Variance reveals the effect on labour Cost of actual output or yield being more or less than the standard yield. Labour Yield Variance = (Actual Yield — Standard yield from actual input) x Standard labour Cost per unit of output—~ aa Methods and Techniquen of Cont py, ttn Mlustration ~ 13 A reputed firm gives the detail of grade A & B worker the standard dir A Ct abe which is ¥ 100 per unit. The details are given below: Mt Grade of workers Hours Rate () _|Amount( A 25 25 62.50 B 20 2 40.00 45 102.50 During a period 80 unit of the product were produced, the actual labour cost of y.. are as follows. which Grade of workers Hours Rate (0) |Amount(?) A 3,000 2 6,000 B 1,600 3 4,800 4,600 10,800 Calculate Labour Mix Variance. Solution: Labour Mix Variance = Standard Rate x (Revised Standard Hours — Actual Hours) Standard hours of the grade Total Standard hours * Total Actual Hours Revised Standard Hours = Standard hours of the Grade A= 25x 8 B= 20x 8 Total 3,600 2000 Revised Standard hours: Grade A = 3555 * 4600 = 2,556 hrs. _ 1600 * 3600 Grade B x 4600 = 2,044 hrs. Labour Mix Variance Grade A = 2.5 (2,556 — 3,000) = 1110 (Adverse) B = 2 (2,044 — 1,600) 888 (Favourable) Total Labour Mix Variance % 222 (Adverse) Labour Yield Variance ; shectfaton This variance is similar to Material Yield Variance. This Variance reveals the e labour Cost of actual output or yield being more or less than the standard yield. en Labour Yield Variance = (Actual Yield — Standard yield from actual input) x labour Cost per unit of outputandtard Conting 199 watration — 14 Standard Nine 1,600 hours Standard Rate z iBper Actual Output 460 Unita. ™ Standard Output 500 unite, Calculate Labour Yield Variance, solution: Standard Time per ‘nit = 1,600 houra + OBL Der unit Labour Yield Varian isianannate 500 units = 3 hours Standard C Shoura@%16 = 245 (Actual Yield ~ Standard Yield) » Standard Output Rate = (450 ~ 500) x 45 = 2 2,250 (Adverse) lustration — 15 ‘The detail regarding the composition and the weekly wages rates of labour force ingaged on a job scheduled to he completed in 30 weeks are as follows. Standard Actual Category of No, of weekly wage No. of weekly wage workers Labourers Rate per labourer Labourers rate per labourer “Skilled a G7 70 70 Semi-Skilled 45 40 30 50 Unskilled 60 30. 80 20 ‘The work is actually completed in 2 weoke calculate the various labour variances. Solution: }) Labour Cost Variance = Standard Cost of Labour — Actual Cost of Labour Skilled = (75 » 30 x 60) - (70 x 32 x 70) = 1,35,000— 1,56,800 = % 21,800 (Adverse) SemiSkilled = (45 x 30 x 40) ~ (80 x 82 x 50) = 54,000 - 48,000 = 76,000 (Favourable) = (60 x 30 x 30) — (80 x 32 x 20) = 54,000 - 51,200 = 72,800 (Favourable) Total Labour Cost Variance = 213,000 (Adverse) Labour Rate Variance = Actual Hours x (Standard Rate — Skilled = 70 x 32 x (60-70) = Semi-Skilled = 30 x 32 x (40 - 50) Unskilled = 80 x 32 x (30 — 20) Total Labour Rate Variance = % Unskilled 2) Actual Rates) % 22,400 (Adverse) 9,800 (Adverse) 25,600 (Favourable) 6,400 (Adverse) "200 Labour Efficiency Varin’ Verification: Labour Cost Vai 13,000 Adve: jance = =% 6,4 LHS. = Labour Mix Variance Revised Standard Time Revised Standard Time= ‘Total Labour Efficiency Variance ~ Methods 1nd Techniquen op 8 OF 6, MA, Standard Rate x (Standard Houry 70 « :12)1 = 8.600 (Pavaraiya (10 « 82)) = @ 16,600 avons (80 « 12)] = 2 22,800 (aver = © 6,600 (Advernay nee naan 60 [(75 * 80) AO[(AS x 30) = 30 [GO x 30) Moy Labour Rate Variance + Labour Efficiency Varig 00 Adverse + % 6,600 Adverse Bee R.H.S. = Standard Rate x (Revised Standard Time — Actu: is calculated as follows: Standard hours of the Grade Total Standard Hours AI Ting x Total Actual Hours 22 Skilled = a x 5,760 = 2,400 hours a 1,350. 69 = 1.440 h Semi-Skilled = 5 799 * 8,760 = 1,440 hours : 1800 yarns : Un-skilled = 5799 * 5,760 = 1,920 hours Calculation of Standard Weeks and Actual Weeks Standard Actual Skilled 75 x 80 = 2,250 70 x 82 = 2,240 Semi-Skilled 45 x 30 = 1,350 30 x 32 = 960 Unskilled 60 x 30 = 1,800 80 x 32 = 2,560 Total 5,400 5,760 Labour Mix Variance = (Revised Standard Time — Actual Time) x Std Rate Skilled % 9,600 (Favourable) Semi-Skilled = (1,440 — 960) x 40 = 19,200 (Favourable) Unskilled = (1,920 — 2,560) x 30 2 19,200 (Adverse) Total Material Mix Variance & 9,600 (Favourable) Illustration - 16 The standard material required to manufacture 1 unit of product ‘X’ is 10 kgs and the standard price per Kg of material is % 25. The cost accounts records however reveal that 11,500 kgs materials costing % 2,75,000 were used for manufacturing 1,000 units of product ‘X’. Calculate Material variances. Solution:ganctard Costing 204 Standard wgon = 4,999 ws Nita 10 kite = 10,000 kee Actual Rate = 2:78.000 iY Vs09 = 8 24 ost Vari a Nance = Standard Cost — Actual ( = Sta ~ Actual Cost . (SQ « SR) ~ (AQ « AR) = 20,000 « 25) — (11,500 x 24) = 26,000 (Adverse) = Actual Quantity x (Std Rate ~ Actual Rate) © 11.500 (25 ~ 24) = 11,500 x 1 = 11,500 (Favourable) atrial wage Varina 11,500 (Favourable) © = Standard Price x (Standard Quantity — Actual Quantity) = 28(10,000 - 11,500) 25 x (-1,500) 37,500 (Adverse) Material Ci 2.50,000 — 2,76,000 Material Price Variance 9 $ " jllustration - 17 The standard materials required for producing 200 units is 250 Kgs. The standard price of 0.60 paise per Kg 2,50,000 units were produced during the period. Actual materi purchased were 3,20,000 Kgs at a cost of ¥ 1,95,200. From the above Calculate 2) Material Cost Variance >) Material Price Variance ©) Material Usage Variance. Solution: Actual Quantity = 3,20,000 Kgs 1,95,200 Actual Rate = 359,000 ~ 0.61 paise Standard Quantity — For 200 units - 250 Kgs 280,000 x 250 _ . For 2,50,000 units = — w = 3,12,500 Kgs Standard Rate = 0.60 paise. t Variance = Standard Cost - Actual Cost = (SQx SR)- (AQ x AR) = (3,12,500 x 0.60) — (3,20,000 x 0.61 _— = 770 (Adverse) 1) Material Cos ) = 187,500 - 1,95,200~ea Methods and Techniquen of Cont han hg x (Std Rate ~ Actual Rate) chun! Quant 3,20,000 (0.60 = 0.61) 3,200 (Adverse) Standard Price x (Standard Quantity ~ Actual Quang, 0.60(3, 12,500 — 3,20,000) ity) 0.60 7,500 = € 4,500 (Adverse) 2) Material Price Variance 3) Material usage Variance Illustration - 18 The following information is obtained from a standard Cost Card. Labour Rate = 1.80:per hour Hours ~ 4 hours per unit Actual production data are: Units produced — 400 units Labour Rate - % 1.90 per hour Hour worked — 1,500 Calculate: a) Labour Cost Variance b) Labour Rate Variance ¢) Labour Efficiency Variance. Solution: Standard Rate =f 1.80 Standard Time hrs @ 400 units = 1,600 hrs Actual Time = 1,500 hrs. Actual Rate = % 1.9. ) Labour Cost Variance = Standard Cost — Actual Cost : = (1,600 x 1.80) — (1,500 x 1.9) = 2,880 — 2,850 =% 80 (Favourable) 2) Labour Rate Variance = Actual Time (Standard Rate — Actual Rate) = 1,500 (1.80 — 1.90) = 7 150 (Adverse) 3) Labour Efficiency Variance = Standard Rate x (Standard Time — Actual Time) = 1.80 x (1,600 — 1,500) = % 180 (Favourable) Illustration - 19 From the following information compute: a) Material Cost Variance b) Material Price Variance ¢) Material Usage Variance een Standard Quantity of materials per unit 4 Kgs. standard price per Kg of Materials * 5 Actual Production1,000 unitsStandard Cos a8 Materials actually used 4.800) Kgs Actual Purchase price of material por Ki Solution: Standard Quantity = 1000 units @t A Ras per iit = O00 Kae Standant Rate = 250 Actual Quantity = 4,900 Kgs Actual Rate 1) Material Cost Variance a natant Cost — Aetnat Orst SQN SAY= QS AY (4.000 © 0) — 800s 00,000 — 2.98500 = FAGAN (Adwerse) ctuat Quantity \ Standant Rate ~ Aemal Rated = AS00N GO ~ SA =F 21,A00 CAdvere) ant Rate \ (Srandant Quantity — Aetual Quantity) 50 x GOOD = 4.900) = 314.000 (Adverse) Material Price Variance 3) Material Usage Variance " Illustration - 20 The standard Matera cost to prepare a ton of chemical N is, 50 tons of material C at a Cos Calculate: a) Material Co: co) Material Usage Variance. Solution: Computation of Standard Qty and Actual Qty Sid Qiy| Std Rate | StdAmt | actual Qty | stetual Rate | Ae! tual 20,000 10 BOON 9 270,000 an 3 40,00 6 BAO.000 5 yoo e 50.00 7 QOD Kgs. a 7 6,30,000 | Kes. 120,000 _T8,80,000 Actual Cost 0,000 = 2.80,000 (Adverse) otal Rate) and Cos 6,30,000 - , Actual Quantity x (Std 30,000 (10-9 80,000 Hawouratite) Material Cost Variance = 2) Material Price Variance204 Methods and Teehniquen of ¢ “OM Aeny 10,000 (6-6) 410,000 (Adverney Min 50,000 (77) ‘Total Material Price Variance = © 10,000 (Adverse) 1] Usage Variance = Standard Rate » (St = 10 (20,000 ~ 30,000) 5 (30,000 — 40,000) 7 (40,000 ~ 50,000) = ‘Total Material Usage Variance = % 2,20,000 (Adverse) dard Quantity ~ Actual ¢ 2 1,00,000 (Adverse) 50,000 (Adverse) 70,000 (Adverse) any du; ity Illustration — 21 The details regarding the standard cost card relating to material needed to prog of groundnut oil: Quantity of groundnut required 3 Kgs. price of groundnut? 2.59 Actual Production data: Production during the month 1,000 Kgs. Quantity of material used 3,500 Kgs. Price of groundnut % 3 per Kg Calculate: a) Material Cost Variance b) Material Price Variance ©) Material Ussen ce 1 Kg Per kg. Variance Solution: Standard Quantity — 1,000 @ 3 per Kg = 3,000 Kgs. Standard Price = % 2.50 Actual Quantity = 3,500 Kgs. Actual Rate = 73 Material Cost Variance = Standard Cost — Actual Cost (3,000 x 2.50) — (3,500 x 3) 7,500 — 10,500 = % 3,000 (Adverse) Material Price Variance = Actual Quantity (Standard Rate — Actual Rate) = 3,500 x (2.50 — 3) = % 1,750 (Adverse) Material Usage Variance = Standard Rate x (Standard Quantity — Actual Quantity) = 2.50 (3,000 — 3,500) = 2.50 x 500 = % 1,250 (Adverse) Illustration - 22 From the following particulars compute: material varience. Quantity of materials purchased 3,000 units value of mate! Standard Quantity of materials required per ton of Output ~ 30 units. Standard Rate of Materials % 2.50 per unit Closing stock of materials — 500 units Output during the period — 80 tons rial purchased ~ % 9,000wong 0% yr , ] [dations j Atul ty ME Ug | PHS NARA OA por eit { ts j AWA fe AML ange EE MM | M Cdunutitg oot me eatat Ca FMA Cnty, WH 6 HO carats «4 eee | WK my ANA © LAL tite | hetanh Cnt j AYA 1p Material pte ‘ | WV Varin - CADENA OND Ses tity + taridard Kate ~ Aetaal Katey ~ tds OA LIAL AM) = SLAY Uhboer ey J} Meri Keay Yariny 8 = SWeanidsind fi = LS (AAU [Hustration In Saetury Mr NOU Wore, frandard working hwnen ae a enyssgee ” 7 yer weed wee | four, During W HEEK In March ee 40 “ ata ; eerie 4410 gutise por bone and ye for work aie anita, Hoes Setany At tic url for fo I neers 8 AO yen agpremirinde labour Vesrinn h Sor Nive; besurs dl Nolutlons Labour Co Sandard Cost of Labour i Bandard performance Actual Output = 320 uni BD ss Hrs per wnkere | Varian: © Stesnidierd Cats — os as Slows: = 10 units por yang hour )) Standard hour | 10 oO Standard hour = 34 7 100 = 2,400 Here For 100 workers Standard Hours 7 Standard Rate Standard Cost of Labour = 44007050 = 71,900 lated as folle 4 calc =7 1,000 Actual Cont of Labour for 40 bra 50 workers for 40 bra @ 50 paive 10 workers for 40 hrs @ 70 pe 2 280 A0 workers for 40 bra @ 40 pai z 640 = % 1,920 ‘ost Variance = Standard Cost — Actual Cost = 1,900 - 1,920 = 2 20 (Adve! Therefore, Labour ©206 Method and Techniques of sof Gy, 2 Labour Rate Variance = Actual hours « (Standard Rate 50 «40 (0.50 ~ 0.50) = 0 10 < 40 (0.50 = 0.70) = % 80 (Adverse) 10 < 40 (0.50 ~ 0.40) = 160 ¢ Total Labour Rate Variance = @ 80 (F ACU Tate, tandard Rate x (Stand, 50 x (3,800 — 3,500) ).50 x 300 =~ 150 (favourable) Where actual time is calculated as follows: 2,000 hrs + 400 hrs + 1,600 hrs 4,000 hrs — Idle time (6 hrs x 100 Worker: Idle time = 500 hrs Therefore, Actual hours = 4,000 hrs — 500 hrs = 3,500 hours 4 Idle hour = Idle Time x Std Rate = 500 hrs x 0.50 = % 250 (Adverse) 3) Labour Efficiency V: ‘d hours — Actual fy, Actual hours Illustration - 24 The following details are available from the records of ABC Ltd « manufacturing article A for the week ended 28'" September. Hours Rate per hour Total Skilled Labour 10 3-00 30 Semi-Skilled Labour 8 1-50 RB Unskilled Labour 16 1-00 16 5S The actual production was 1,000 articles of A for which the actual hours worked 2:3 rates are given below: Hours Rate per hour Total Skilled Labour 9,000 4-00 36,000 Semi-Skilled Labour 8,400 1-50 12,600 Unskilled Labour 20,000 0-90 18,000 66,600 From the above set of data you are asked to calculate: 1) Labour Cos 2) Labour Rate Variance 3) Labour Efficiency Variance 4) Labour Mix Variance. Solution: d) Labour Cost Variance = Standard Cost — Actual Cost Rate Standard Cost = Standard hours x Standard Rate Skilled = 1,000 articles @ 10 hrs = 10,000 hrs x 3 = ¥ 80000 Semi-Skilled = 1,000 articles @ 8 hrs = 8,000 hrs x 1.5 =# 12,000yard Cosune Unskited aod ae 1.000 ayy Actual Cox: AHelon @ 16 , satan St Netual hates Wea © 16,000 bra» 1 216.000 , Abour = 9,000 fe Aetunl Rate Somi-Skilled MEO AS 26,000 8100 hours @ 1.80 2 20.000 houra @ 0.90 Unskitled t Va 100 718,000. 30,000 ~ 36,000 12,000 ~ 12,600 abour = 16,9, é 000 — 18,00 Total Labour Cost v 10 = % 2,000 (Adverse) + Pri vi ‘ariance = % 8,60 ver’ . Price V: - 600 (Adverse). Labour Price Variance = Actual hours x Standard se). Skilled Labour = ard Rate — Actual Rate) 9,000 x (3 — = Semi-Skilled Labour = 8,400 . i a 1.50) : ae oer. -50— 1.50) = Nil Unskilled Lacbour = 20,000 x (10.90) = z 2,000 (Favorable) _____ Total Labour Price Variance = % 7,000 (Adverse). Labour Efficiency Variance = Standard Rate (Standard hours — Actual hours) Skilled Workers = 3(10,000 — 9,000) = % 3,000 (Favourable) i % 600 (Adverse) Unskilled = 1.0 (16,000 — 20,000) = ¥ 4,000 (Adverse). Total Labour Efficiency Variable = % 1,600 (Adverse). Labour Mix Variance = Standard Rate x (Revised Standard mix of Actual hours worked — Actual Mix) = 2 6,000 (Adw % 600 (Adverse) ) Unskilled L Semi-Skilled workers = 1.5 (8,000 — 8,400) Standard mix Revised Standard. mix of Actual work = Total Standard hous © Total Actual Hours 10,000 Skilled workers = 3] 999 * 37,400 = 11,000 hrs 8,000 Semi-Skilled workers = 34,000 * 37,400 = 8,800 hrs. 16,000 Unskilled workers = 34,000 x 37,400 = 17,600 hrs. Labour Mix Variance for Skilled workers = 3 (11,000 — 9,000) = % 6,000 (Favourable) Semi-Skilled workers = 1.50 (8,800 ~ 8,400) = & 600 (Favourable) Unskilled workers = 1.00 (17,600 — 20,000) = % 2,400 (Adverse) Total Labour Mix Variance = ¥ 4,200 (Favourable)200 Methane wud Porting, MON by, Mlustration — 26, Mh, The fo JOE INFOrmation tie pour rate <2 KO par he Hours « red from atandard cout ound ‘ : 1 hour per unit Actual proc ton data ave: 1400 unite Labour rate - 21.90 per hour Hour w. + 1,600 Calcul Unite produ a) Labour cost variance b) Labour vate va ©) Labour ef and eney varianee Solution: ven, Standard labour rate @ 1.80 per hour Standard time 4 hours per unit « for 400 units = 4 x 400 = 1,600 hours Actual rate 1,90 per hours Actual time = 1,500 hourn a) Labour cost variance: = (Standard rate x Standard time - Actual time x a v1 = (1,600 x 1.80 — 1,500 % 1.90) = (2,880 ~ 2,850) = 2 30 (Favourable) b) Labour rate variance = Actual time (Standard rate ~ Actual rate) 1,500 (1.80 ~ 1.90) = 1,500 x (-0.1) = % 150 (unfavourable) c) Labour efficiency variances = Standard rate (Standard ~ Actual time) 1.80 (1,600 — 1,500) = 1.80 x 100 = 180 (favourable) Illustration — 26 For making 10 Kg of GEMCO the standard material requirement is Material Quantity Kg Rate per Kg @ A 8 6 B 4 4 During April 1000 Kgs. of GEMCO were produced. The actual consumption of mati is as under.Material Retin B —_. aM . —_ qeulate:—@) Material Gon | b) Material pra ©) Material U pont " qulation of Standarg a los Quantity 1,000 ~ 9 5008, por Bo 104 To = 800 Kgs 1,000 — 2 100074 _ndard Rate id = 400 Kes 3 726 Given) _quel Quantity * 4 Given) cqual Rate For A-@7 B-%5 Material Cost Variance = Standard Cost — Actual Cost = SQx SR- AQ» AR A = (800 x 6) ~ (750 x 7) = 4,800 - 5,250 (400 « 4 — 500 x 5) = 1,600 - 2,500 Total Material Cost Variance Material Price Variance = AQ » (SP — AP) A = 750% (6-7) = 750 (Adverse) B = 500~ (4-5) = 500 (Adverse) Total Material Price Variance = 1,250 (Adve Material Usage Variance = SP x (SQ- AQ) ‘4 = 6 x (800 — 750) = 300 (Favourable) B = 4x (400 — 500) = 400 (Adverse) Total Material Usage Variance 100 (Adve! 450 (Ads B210 Mlastration 27 The Standart ans te produce Material A Mottunts 00d Poohaqog op TCO one UIE Of product (nn follow: BO nite a CEB per anit n AO united © 20 por unit c TOO unite) © 26 per unit 240 units a Durayg the month of April, 10 units were actually produced and consumpty val A 640 units @ 17.50 per unit = B 950 units @ @ 18.00 per unit = ™, C870 units @ & 27.50 per unit = Caleulate all material Variane Solution: 60 units @ 52,295 Calculation of Standard Units: A= for 1 unit — 60 for 10 uni A B for 10 unit B C for 1 unit for 10 units c Standard Rate is given: ; B e Actual Quantity is given: B c Actual Rate is given: A B a dD 600 units — for 1 unit — 80 -2 800 units 100 1,000 units — 640 units — 950 units — 870 units — 717.50 — 718.00 — % 27.50 Material Cost Variance = Standard Cost — Actual Cost SQ x SR - AQ x AR A = (600 x 15) — (640 x 17.50) = 9,000 — 11,200 = 2,200 (Adverse) B_ = (800 x 20) — (950 x 18) = 16,000 — 17,100 = 1,100 (Adverse) C = (1,000 x 25) — (870 x 27.50) = 25,000 — 23,925 = 1,075 (Favourable)gandard Costing Total Material Go, ” (vane St Variance = 2 9 yy Matorial Price Vavingnn Actual 6 2225 (Adverne) MT Quantity Material 4 < 10x ( x5 B Cz 1 Price Vavin Material Usage Variance (Standard Price : 17.60) = @ 1,600 (Ae 950 x (20 ~ 18) = 2 1.99 on 870 x (25 — 97 Actual Price) ne) 1900 (Favourable) 50) = RS 2,175 (Adverse Nee =% 1875 (Adverse) pe yen” = Standard Price x Total Materi Matovial d= ye. (Standard Quantity — Actual Quantity) ee ~ 00 ~ 640) = x Goo (Adverse) on (800 ~ 950) = & 3,000 (Adverse) ; 25 ‘Total Material Usage Variance a 50 ag ais Favourable) js ‘ = % 350 (Adver: Material Mix Variance = verse) =. Standard Py; Revised Standard Quantity ; ndard Price (Revised Standard Quantity - Actual Quantity) antity is calculated as follows: Material 4 = —800_ 2,400 * 2.460 = 615 units B = 800_ 2,400 * 2.460 = 820 units 1 c = 1000 2,400 * 2,460 = 1,025 units Material Mix Variance for A = 15 x (615 — 640) % 875 (Adverse). B = 20 x (820-950) = % 2,600 (Adverse). C = 25 x (1,025 — 870) = % 3,875 Favourable) Total Material Mix Variance = % 900 (avourable.) Material Yield Variance = Standard Output Price x (Actual Yield — Standard Yield) . Total Standard Cost _ 50,000 _ Standard Output price Standard Units = 10. 7 = 5,000 ; ‘Actual usage of materials Standard Yield = Standard usage per unit of output ) uw al = 10.25 units 240 «Material Yield Variance = Standard Output Price x (Actual Yield - Standard Yield) = 5,000 x (10- 10.25) = % 1,250 Adverse MCV = MPV + MMV + MMV = 2,225 (A) = € 1,875 (A) + 900 (B) + © 1,250 (A) Verification:Mow 2412 Roviow Questions Conceptual Type i 1, Dofine Standard Coat ! 2. What do you m ny by varionce? Mention any four steps involved in s Hard coating. 4, What is Material Cost Variance? What is Labour Cost Variance? 6. Define Stan ‘d Costing. Analytical Type What is standard costing? Briefly state the advantages and disadvantage. costing? State the difference between stan What are the factors to be satisfied before setting of d costing and budgetary Control, andard cost? Practical Problems Q-1. The standard materials required for producing 400 units is 500 Kgs. The stand is 1.20 paise per Kg: 5,50,000 units were produced during the period. Actual m al may purchased were 7,20,000 Kgs at a cost of % 2,95,500. From the above Calculate: a) Material Cost Variance b) Material Price Variance c) Material Usage Variance. Q-2. The standard material required for producing 100 units is 120 kgs. A standard price 0.50 per kg is fixed and 2,40,000 units were produced during the period. c materials purchased were 3,00,000 kgs, at a cost of ¥ 1,65,000. Calculate: a) Material cost variance b) Material usage variance ‘A manufacturing concern furnishes the following information: 100 Kgs. Q-3. Standard: Material for 70 Kgs. finished products Price of material Z1per Kg Actual: Output 2,10,000 Kgs. Material Used 2,80,000 Kg: Cost of Materials % 2,52,000 Calculate: a) Material Usage Variance b) Material Price Variance c) Material Cost Variance