COST VARIANCES ANALYSIS

Material Variances

Labour Variances

Overhead Variances

Standard Cost Accounting

Variance analysis is a control technique. The control process
involves comparison of actual costs (AC) with the standard costs
(SC). Variances represent the difference between actual cost (AC)
and standard cost (SC). They basically relate to performance
deviations. If AC is less than SC, it is a sign of efficiency and the
difference is termed ‘favourable’/‘positive’. If it is more than SC, it is
a sign of inefficiency and the difference is referred to as
‘unfavourable’/‘negative’.

As controlling devices, variances help to assign responsibility for

deviations and, thus, to control cost. For this purpose, they are
classified as controllable and uncontrollable. If a variance can be
traced with the responsibility of a particular segment, it is said to be
controllable. If a variance arises from causes beyond the control of
responsible individuals, it is said to be uncontrollable. This
distinction is extremely important for managerial control.
 Cost Variance
The cost variances relate to the costs of a manufacturing
enterprise. The three elements of the costs of such
an enterprise are:

1.
1. Material
Material Cost
Cost Variance
Variance (MCV)
(MCV)

2.
2. Labour
Labour Cost
Cost Variance
Variance (LCV)
(LCV)

3.
3. Overhead
Overhead Cost
Cost Variance
Variance (OCV)
(OCV)
 Material Cost Variances
Material cost variance is the difference between the standard cost of
materials and the cost of materials actually incurred.
MCV on Per Unit Basis
MCV = (SQ × SP × AO) – (AQ × AP × AO)
MCV on Aggregate Basis
MCV = (TSMC – TAMC)
Where,
SQ = Standard usage of materials per unit
SP = Standard price of materials per unit
AO = Actual output in units
TSMC = Total standard cost of actual output
AQ = Actual usage of materials per unit
AP = Actual price of materials per unit
TAMC = Total actual cost incurred
Example 1
Compute the material cost variance (MCV) from the following
information.
Particulars Standard Actual
Material usage per unit (kgs) 2 2.2
Price per kilogram (Rs) 14 15
Actual units produced 100
Solution

MCV = (SQ × SP × AO) – (AQ × AP × AO)

= (2 × Rs 14 × 100) – (2.2 × Rs 15 × 100) = Rs 2,800 – Rs
3,300 = Rs 500 (unfavourable/Adverse)
 i) Material Price Variance
Material price variance is the difference between the actual price paid for
purchase of material and the standard price.
When actual price exceeds standard price, the variance is unfavourable
(U/A); favourable variance (F) results when standard price is greater than
actual price. There will be no variance if both the prices are equal.

Material Price Variance = (SP – AP) × AQ

For the facts, in Example 1, the MPV would be:
(Rs 15 – Rs 14) × 220 kgs = Rs 220 (unfavourable/A).
Responsibility for MPV  
Material price variance is mainly the responsibility of
the purchase officers who are in charge of making
the entire purchases of the firm.
 ii) Material Usage/Quantity
Variance (MUV)
Material usage variance occurs when actual usage of materials
differs from standard usage.

MUV = [(SQ × AO) – (AQ × AO)] × SP

For Example 1, the MUV would be:
= [(2 × 100) – (2.2 × 100)] × Rs 14 = Rs 280
(unvarouable).
 Graphical Presentation of
Material Variances

15 15
Price variance (Re 1 × 200 kgs) = Rs 200 Price variance (Re 1 × 220 kgs) = Rs 220
14 14

12 12

(20 kgs × Rs 14) = Rs 280

(20 kgs × Rs 14) = Rs 280

Price in Rupees per kg

Price in Rupees per kg

Quantity variance
Quantity variance
10 10

Standard cost Standard cost

8 8
(200 kgs × Rs 14) = Rs 2,800 (200 kgs × Rs 14) = Rs 2,800
6 6

4 4

2 2

0 0
0 100 200 220 0 100 200 220

Quantity (in kgs) Quantity (in kgs)

Figure 1: Material Variances Figure 2: Modified Material Variances

 ii.a) Material Mix Sub-Variance
(MMSV)

Material mix sub-variance is the difference between the standard

mix and the actual mix input/quantities of all grades of material
actually used and their corresponding standard price.

MMSV = (Standard mix of actual total quantity of material used) –

(Actual mix of actual quantity of material used) × SR.
For the sake of abbreviation, standard mix may be referred to as
revised standard quantity (RSQ) and actual mix (AM). Accordingly,

MMSV = (RSQ – AQ) × SR.

Example 2
A manufacturing company uses the following standard mix of their
compound in one batch of its production line:
50 kgs of material X at the standard price of Rs 2.
30 kgs of material Y at the standard price of Rs 3.
20 kgs of material Z at the standard price of Rs 4.
The actual mix was as follows:
60 kgs of material X
40 kgs of material Y
10 kgs of material Z.
Determine the MMSV.
Solution
The determination of MMSV involves the following steps:
1. Standard proportion (mix) of materials X, Y and Z (5:3:2) or (50:30:20).
2. Actual total quantity used, 110.
3. Standard mix of actual quantity used (RSQ) by using the following
criterion:
(Total actual quantity used) × (Standard proportion of each type of
material)
Where
X = 110 kgs × 5/10 = 55 kgs
Y = 110 kgs × 3/10 = 33 kgs
Z = 110 kgs × 2/10 = 22 kgs
MMSV = (RSQ – AQ) × SP
X (55 – 60) × Rs 2 = Rs 10 (unfavourable)
Y (33 – 40) × Rs 3 = Rs 21 (unfavourable)
Z (22 – 10) × Rs 4 = Rs 48 (favourable)
Net MMSV = Rs 17 (favourable)
 ii.b) Material Yield Sub-Variance
(MYSV)
Material usage variance can be more appropriately designated as
material yield sub-variance.

MYSV on Inputs Basis

MYSV = (Actual input - Standard input) × Weighted average
standard input price.
MYSV on Output Basis
MYSV = (Standard yield – Actual yield) × Standard material cost
per unit of finished output.
MYSV = (Standard loss of final product in units – Actual loss of
final product of units) × Standard material cost unit of finished
output.
Example 3
In a chemical manufacturing company, 80 per cent is the standard yield
expected of actual inputs; 50 units of inputs are introduced in the process
and actual final production achieved is 38 units. The standard price per unit
of input is Rs 8. Determine the material yield sub-variance by various
methods.
Solution

(a) Output basis:

(i) (Standard yield – Actual yield) × Standard material cost per unit of
finished output = [40 (0.80 × 50) – 38] × Rs 10 ( Rs 8 × 100/80) = Rs 20
(unfavourable)
(ii) (Standard loss – Actual loss) × (Standard material per unit of finished
output) = (10 – 12) × Rs 10 = Rs 20 (unfavourable).

(b) Input basis:

(Actual input – Standard input) × Standard input price = [50 – 47.5 (38 ×
10)/8] × Rs 8 = Rs 20 (unfavourable)
 2) Labour Cost Variance (LCV)
Labour cost variance is the difference between the standard
labour costs and the actual labour costs.

LCV on Per Unit Basis

LCV = (SH × SR × AO) – (AH × AR × AO) (on per unit basis)
LCV on Aggregate Basis
LCV = (TSLC – TALC)
Where
SH = Standard labour hours required per unit
SR = Standard wage rate per hour
AO = Actual output achieved during the period
AH = Actual labour hours spent per unit
AR = Actual wage rate per hour
TSLC = Total standard labour cost of actual output
TALC = Total actual labour cost of actual output
Example 4
From the following information, compute the labour cost
variance (LCV).
 Particulars Standard Actual
Labour-hours per unit 4 5
Wage rate (Rs) 2.5 3
Actual units produced 100

Solution
LCV = [(SH × SR × AO) – (AH × AR × AO)]
= (4 × Rs 2.5 × 100) – (5 × Rs 3 × 100) = Rs 500
(unfavourable/A)
i) Labour Rate Variance (LRV)
Labour rate variance is the difference between the actual wage
rate and the standard wage rate.

Labour Rate Variance = (SR – AR) × AH × AO.

In Example 4,
LRV = (Rs 2.5 – Rs 3.0) × 5 × 100 = Rs 250 (unfavourable).
Responsibility for LRV
The departmental executives may be held responsible only for
that portion of the LRV which arises due to employment
of wrong grades of labour.
 ii) Labour Efficiency
Variance (LEV)
Labour efficiency variance is a function of the difference between
the hours workers should have consumed in actual production
and the actual hours worked and the standard wage rate.

Labour Efficiency Variance = [(SH × AO) – (AH × AO)] × SR

In Example 4,
LEV will be: [(4 × 100) – (5 × 100)] × Rs 2.5 = Rs 250
(unfavourable).
Labour efficiency variance can be sub-divided into
(1) Idle time variance
(2) Labour revised efficiency variance consisting of
Labour mix sub-variance and Labour yield sub-variance.
 (a) Idle Time Variance

This variance represents that segment of the LEV

which arises due to the standard cost of those actual
hours for which the workers have been paid but during
which they remain idle due to non-availability of raw
materials, breakdown of machines, failure of power
and such other abnormal circumstances.

Idle Time Variance = (Idle time in hours × Standard

wage rate)
Assume in Example 4 that the number of idle time hours during the period
was 110. The idle time variance would be unfavourable by Rs 275 (110
hours × Rs 2.5). The workers, in fact, actually worked only for 390 hours,
the standard hours allowed for which were 400. Clearly, the workers are
more efficient and not inefficient. The earlier conclusion has just got
reversed. The revised LEV is Rs 25 favourable [(390 hours – 400 hours) × Rs
2.5]. Thus, it is useful to segregate idle time variance from the total LEV:
Idle time variance Rs 275 (unfavourable)
Labour efficiency variance (revised) 25 (favourable)
Total labour efficiency variance 250 (unfavourable)
This form of presentation of reporting LEV is certainly more useful to the
management for controlling future costs and initiating control action
compared to the single figure of the total LEV of Rs 250.
 b) Labour Revised
Efficiency Variance  
Labour revised efficiency variance is a function of the difference between
the actual labour mix and the standard labour mix and the
standard wage rate.
LEV = [Standard mix of actual labour hours worked (RSH) – Actual mix of
actual hours worked (AH)] × SR.

i) Labour Mix Sub-Variance  

LMSV = (Revised Standard Hours – Actual Labour Hours Spent per unit) x
Standard Wage Rate Per Hour.
ii) Labour-Yield Sub-Variance (Output Basis)
LYSV = Actual Yield – Standard Yield) x Standard labour cost per finished
unit.
Labour-Yield Sub-Variance (Input Basis)
LYSV = (TAH – TSH) x Weighted Average Standard Rate Per Hour.
Example 5
The standard labour – mix for producing 100 units a of product is:
4 skilled men @ Rs 3 per hour for 20 hours
6 unskilled men @ Rs 2 per hour for 20 hours
But due to shortage of skilled men, more unskilled men were employed to
produce 100 units. Actual hours paid for were:
2 skilled men @ Rs 4 per hour for 25 hours
10 unskilled men @ RS 2.50 per hour for 25 hours.
Compute the labour mix variance.
Solution
The data can be presented as follows:
Category Standard Actual
of Num Hou Total SR TSLC Num Hours Total AR TALC
workers ber rs hours ber hours
Skilled 4 20 80 3 240 2 25 50 4 200
Unskilled 6 20 120 2 240 10 25 250 2.5 625
Total 200 2.4 480 300 2.75 825
LCV = TSLC – TALC = Rs 480 – Rs 825 = Rs 345 (unfavourable)
(a) LRV = (SR – AR) × AH)
(i) Skilled = (Rs 3 – Rs 4) × 50 = Rs 50 (unfavourable)
(ii) Unskilled = (Rs 2 – Rs 2.5) × 250 = Rs 125 (unfavourable)
Total LRV = Rs 175 (unfavourable)
(b) LEV = (SH – AH) × SR
(i) Skilled = (80 – 50) × Rs 3 = Rs 90 (favourable)
(ii) Unskilled = (120 – 250) × Rs 2 = Rs 260 (unfavourble)
Total LEV = Rs 170 (unfavourable)
Total LEV can be split into: (a) Labour mix sub-variance, and (b) Labour
yield sub-varinace
Labour Mix Sub-Variance  
To determine the labour mix sub-variance (LMSV), we are required to
calculate the values of revised standard hours for two grades of labour.
The revised standard hours for skilled and unskilled labourers respectively
would be: Actual total hours × Proportion of skilled hours to the total
standard hours.
= (300 × 80)/200 = 120 hours (skilled)
= (300 × 120)/200 = 180 hours (unskilled)
LMSV = (RSH – AH) × SR
(i) Skilled = (120 – 50) × Rs 3 = Rs 210 (favourble)
(ii) Unskilled = (180 – 250) × Rs 2 = Rs 140 (unfavourble)
Total LMSV = Rs  70 (favourable)
The residual LEV should be Rs 240 (unfavourable).
Labour Yield Sub-Variance 
Like the material yield sub-variance, it is determined after taking away the
materials mix sub-variance. The basis of computation of labour yield sub-
variance (LYSV) would be to find out how many more or less than the total
absolute standard hours (and not their break-up) are used in making the
actual production (here 100 units). Here, the number of standard hours
required are 200; the actual hours worked are 300. The difference is to be
multiplied by the weighted average standard rate. Symbolically
LYSV = (TSHs – TAHs) × Weighted average SR = (200 – 300) × Rs 2.4 = Rs
240 (unfavourable)
The above method of determining the LYSV is based on the input basis. The LYSV
like the MYSV can be determined on the output basis also. The formula is:

(Standard yield in units expected from the actual hours worked-Actual

yield)  Standard labour cost per unit
In 300 hours, the standard yield should be 150 units because in 200 hours,
the expected yield is 100 units.
LEV = LMSV = Rs  70 (favourable)
LYSV = Rs 240 (unfavourble)
= Rs 170
 3) Overhead Variances
A) Variable overheads
Variable overheads cost variance (VOCV) (unit [(AH × AO × AVOR ) – (SH × AO ×
basis) or VOCV (aggregate basis) SVOR )
(a) Variable overheads spending variance (VOSV) TAVOC – TSVOC
(b) Variable overheads efficiency variance (VOEV) [TAVOC – (TAH × SVOR )]
For confirmation, VOCV) (TAH – TSH ) × SVOR per hour
VOEV + VOSV
(B) Fixed overheads
Fixed overheads cost variance (FOCV  ) (output [TAFOC – (SFOR per unit × AO )]
basis) [TAFOC – (SFOR per hour × SH × AO )]
or FOCV (times basis) TAFOC – BFOC
(a) Fixed overheads spending variance (FOSV) [(NO – AO ) × SFOR per unit]
(b) Volume variance (output basis) (VV)
[Link] overheads efficiency (FOEV) [(TAH – TSH ) × SFOR per hour]
[Link] variance (AD – SD) × SFOD
[Link] variance (CV) [(TAH – TNH ) × SFOR per hour]
For confirmation, FOCY FOSV + VV
or
FOSV + FOEV + Calender variance + CV
Example 6
The following is an extract of some relevant data of Hypothetical Ltd
relating to its variable factory overheads.
Standard hours allowed (per unit) 2
Standard costs allowed per direct labour-hour Rs 3
Actual production (units) 80
Actual direct labour-hours 165
Actual overheads incurred 518
Determine the VOCV
Solution
VOCV = (Rs 6* × 80) – Rs 518 = Rs 480 – Rs 518 = Rs 38 (unfavourable)
*Rs 6 = (SHs × SVOC per hour) = 2 × Rs 3
Rs 38 (unfavourable) VOCV can be either due to overspending over the
standard budget or due to more hours taken by the workers
from the standard hours allowed.
Accordingly, VOCV can be split up into two sub-variances: (a) Variable
factory overhead efficiency variance (VFOEV); (b) Variable
factory overhead spending variance (VFOSV).
(1) Variable Factory Overhead Efficinecy Variance (VFOEV)
VFOEV = [(AO × SHs per unit) – AHs] × SVFOR
= (80 × 2 – 165) × Rs 3 = Rs 15 (unfavourable)
(2) Variable Factory Overhead Spending Variance (VFOSV)
(Actual hours worked) × (Standard variable overhead rate per hour)
–  (Actual variable factory overhead costs)
= (165 × Rs 3) – Rs 518 = Rs 23 (unfavourable)
Thus
VFOV = VFOEV + VFOSV: Rs 38 = Rs 15 + Rs 23 (all
unfavourable).
Example 7
The following data relate to the fixed overheads of a company for a month:
1. Actual fixed overheads incurred, Rs 530.
2. Budgeted fixed overheads, Rs 500
3. Normal level of activity for the period, 100 units or 200 hours
4. Standard hours allowed, 2 hours per unit
5. Actual production, 90 units
6. Actual hours worked, 190 hours
Determine the fixed overhead variances.
Solution
FOCV = Rs 530 – (Rs 5 × 90) = Rs 80 (unfavourable)
SFOR = Rs 500 ÷ 100 units = Rs 5 per unit
Alternatively (on hourly basis): FOCV = Rs 530 – (Rs 2.5 × 2 × 90)
= Rs 80 (unfavourable)
SFOR = Rs 500 ÷ 200 hours = Rs 2.5 per hour
The FOCV (Rs 80) can be split into three sub-variances: (i) Fixed factory
overhead spending variance, (ii) Fixed factory overhead efficiency variance
and (iii) Volume variance.
Fixed Factory Overhead Spending Variance (FOSV) 
FOSV = (Actual fixed overhead costs) – (Budgeted fixed costs)
= Rs 530 – Rs 500 = Rs 30 (unfavourable)
Fixed Overhead Efficiency Variance (FOEV) 
FOEV = [(AO × SHs per unit) – AHs] × SFOR (per hour)
= (90 × 2 – 190) × Rs 2.5 = Rs 25 (unfavourable)
Volume Variance 
Volume variance = (SHs – AHs) × SFOR = (200 – 190) × Rs 2.5 = Rs 25
(unfavourable)
 Overheads cost variance (OCV ) [TAOC – (SOR per unit × AO)]
or OCV (hours basis) [TAOC – (SOR per hour × SH per unit × AO)]
(A) Two-variance method
Controllable expenditure variance [TAOC – (BFOC + SVOC per unit × AO )]
Volume variance (NO – AO) × SFOR per unit
(B) Three-variance method
(i) Spending variance [TAOC – (BFOC + SVOC per hour × TAH)]
(ii) Efficiency variance [TAH – TSH ) × SOR per hour]
(iii) Capacity variance (NH – TAH ) × SFOR per hour
(C) Four-variance method  
(i) Spending variance As B(i) above
(ii) Variable efficiency variance (TAH – TSH ) × SVOR per hour
(iii) Fixed efficiency variance (TAH – TSH ) × SFOR per hour
(iv) Capacity variance As B(iii) above
(D) Five-variance method
(i) Fixed spending variance TAFOC – TBFOC
(ii) Variable spending variance (AVORPH – SXORPH ) × TAH
(iii) Variance efficiency variance As C (ii) above
(iv) Fixed efficiency variance As C (iii) above
(v) Capacity variance As C (iv) above
Where,
AVOR Actual variable overheads (per hour or per unit, as the case may be)
SVOR Standard variable overheads (per hour or per unit, as the case may be)
TAVOC Total actual variable overheads incurred
TSVOC Total standard variable overhead costs
SFOR Standard fixed overheads rate (per unit or per hour, as the case may be)
TAFOC Total actual fixed overheads cost
BFOC Budgeted fixed overheads cost
NO Normal output in units
AD Actual days
SD Standard/budgeted days for which production was scheduled
SFOD Standard fixed overheads cost per day
TNH Total normal hours capacity
TAOC Total actual overheads cost (TAVOC + TAFOC)
SOR Standard overheads rate (per unit or per hour, as the case may be)
Example 8
SK Industries Ltd uses a standard cost system. The budget relating to
overheads for the month of January of the current year is as follows:
Normal capacity: 22,000 direct labour-hours, or 11,000 production units
Budgeted overheads at normal (100%) capacity:
Fixed expenses, Rs 33,000 or Rs 1.50 per hour
Variable expenses, Rs 22,000 or Re 1 per hour
Standard overhead rate, Rs 2.50 per hour
Standard overhead rate, Rs 5 per unit
For the month of January, actual facts were:
Actual hours worked, 21,000
Standard hours allowed for actual production of 10,900 units, 21,800
Actual overheads incurred, Rs 54,700 (Fixed Rs 33,490 + Variable Rs
21,210)
Compute the overhead variances under the various methods.
Solution
Total overhead variance = (Actual overheads incurred – Standard overhead
cost charged to production) = Rs 54,700 – (21,800 SHs × Rs 2.50, SOR per
hour = Rs 54,500) = Rs 200 (unfavourable)
1. Two-variance method
(a) Controllable variance: Actual overheads incurred – Budgeted overheads
at actual production = Rs 54,700 – Rs 54,800* = Rs 100 (favourable)
* Fixed overheads Rs 33,000
+ Variable overheads (10,900 × Rs 2) 21,800
54,800
(b) Volume variance: (Normal capacity in units – Actual production) × SFOR
per unit = (11,000 – 10,900) × Rs 3 = Rs 300 (unfavourable)
Alternatively, (Normal capacity in hours-Standard hours allowed for actual
production) × SFOR per unit = (22,000 – 21,800) × Rs 1.50 = Rs 300
(unfavourable)

Summary:
(a) Controllable variance = Rs 100 (favourable)
+ (b) Volume variance 300 (unfavourable)
Total overhead variance 200 (unfavourable)
2. Three-variance method
(a) Spending variance = Actual overheads incurred-Budgeted overheads at
AHs = (Rs 54,700 – Rs 54,000*) = Rs 700 (unfavourable)
*Budgeted overheads costs – Fixed overheads Rs 33,000
+ Variable overheads (AHs × SVOR per hour) 21,000
54,000
(b) Efficiency variance = (SHs – AHs) × SOR per hour (21,800 – 21,000) × Rs
2.50 = Rs 2,000 (favourable)
(c) Capacity variance = (SHs – AHs) × SFOR per hour = (22,000 – 21,000) ×
Rs 1.50 = Rs 1,500 (unfavourable)

Summary
(a) Spending variance Rs 700 (unfavourable)
+ (b) Efficiency variance 2,000 (favourable)
+ (c) Capacity variance 1,500 (unfavourable)
Total overhead variance 200 (unfavourable)
3. Four-variance method:
(a) Spending variance Rs 700 (unfavourble)
Efficiency variance:
(b) Fixed = (SHs – AHs) × SFOR
= (21,800 – 21,000) × Rs 1.50 1,200 (favourable)
(c) Variable = (21,800 – 21,000) × Re 1 800 (favourable)
(d) Capacity variance 1,500 (unfavourable)
Total overhead variance 200 (unfavourable)
4. Five-variance method:
(a) Fixed spending variance Rs 490 (unfavourble)
(Rs 33,490 – Rs 33,000)
(b) Variable spending variance
(AVORPH – SVORPH) × AH
(Rs 1.01 – Re 1.00) × 21,000 210 (unfavourable)
(c) Fixed efficiency variance 1,200 (favourable)
(d) Variable efficiency variance 800 (favourable)
(e) Capacity variance 1,500 (unfavourable)
Total overhead variance 200 (unfavourable)
 Standards Cost Accounting

Recording Variances (Accounting Procedure)

1. (a) (i) Purchase of materials (AP > SP):

Materials Inventory A/c Dr
Materials Price Variance A/c Dr
To Suppliers/Cash
(ii) (AP < SP)
Materials Inventory A/c
Dr
To Materials Price Variance A/c
To Suppliers/Cash
(b) (i) Usage of materials: (AQ > SQ)
Work-in-process A/c Dr
Materials Usage Variance A/c Dr
To Materials Inventory A/c
(ii) (SQ < AQ)
Work-in-process A/c
Dr
To Materials Inventory A/c
To Materials Usage Variance A/c
(iii) (SQ = AQ)
Work-in-process A/c
Dr
To Materials Inventory A/c
2. (a) (i) Accruals of direct labour (AR > SR)
Direct labour payroll Dr
Labour rate variance Dr
To Accrued payroll
(ii) (SR < AR)
Direct labour payroll
Dr
To Accrued payroll
To Labour rate variance
(iii) (SR = AR)
Direct labour payroll
Dr
To Accrued payroll
b)(i) Actual hours used: (AH > SH)
Work-in-process A/c Dr
Labour efficiency variance A/c Dr
To Direct labour payroll
(ii) (AH < SH)
Work-in-process A/c
Dr
To Direct labour payroll
To Labour efficiency variance
(iii) (AH = SH)
Work-in-process A/c
Dr
To Direct labour payroll
Standard Accounting Procedure for Completed Products

Finished product (at standard cost) Dr

To Work-in-process (at standard costs)
When goods are sold to customers the following two entries will be
required:
1. Debtors A/c
Dr
To Sales (at selling price)
2. Cost of goods sold (at standard cost)
Dr
To Finished cost inventory (at standard cost)