UNIT6

MODULE10

STANDARDCOSTING


PRACTICALPROBLEMS

MATERIALVARIANCE

Problem1:

Amanufacturingconcern,whichhasadoptedstandardcosting,furnishedthe
followinginformation:

StandardMaterialfor70kgfinishedproduct:100kg.

Priceofmaterials:Re.1perkg.

ActualOutput:2,10,000kg.

Materialused:2,80,000kg.

Costofmaterial:Rs.2,52,000.

Calculate:

(a)MaterialUsageVariance(b)MaterialPriceVariance(c)MaterialCost
Variance

Solution:

(1)Standardquantity For70kgstandardoutput

Standardquantityofmaterial=100kg.

2,10,000kg.offinishedproducts

2,10,000x100 =3,00,000kg.

70

(2)Actualpriceperkg. Rs.2,52,000=Re.0.90

2,80,000

 (a)MaterialUsageVariance =StandardRate(Standardquantityfor
actualoutputActualquantity)

=Re.1(3,00,000 2,80,000)

=Re.1x20,000

=Rs.20,000 (favorable)

(b)MaterialPriceVariance =Actualquantity(StandardpriceActual
price)

2,80,000(Re.1 Re.0.90)

2,80,000xRe.0.10

Rs.28,000(Favorable)

(c)MaterialCostVariance =Standardquantityforactualoutputx
Standardrate)(ActualquantityxActual
rate)

=(3,00,000x1) (2,80,000x0.90)

=Rs.3,00,000 xRs.2,52,000

Rs.48,000(favorable)

Verification:

MCV=MPV+MUV

Rs.48,000(F)=Rs.28,000(F)+Rs.20,000(F)

Problem2

Thestandardmixtoproduceoneunitofproductisasfollows:

MaterialA 60units@Rs.15perunit=Rs.9,00

MaterialB 80units@Rs.20perunit=Rs.1,600

MaterialC 100units@Rs.25perunit=Rs.2,500

240units Rs.5,000

DuringthemonthofApril,10unitswereactuallyproducedandconsumptionwas

asfollows:

MaterialA 640units@Rs.17.50perunit=Rs.11,200

MaterialB 950units@Rs.18.00perunit=Rs.17,100

MaterialC 870units@Rs.27.50perunit=Rs.23,925

2,460units Rs.52,225

Calculateallmaterialvariances.

Solution:

Material Standardfor10units Actualfor10units

Qty Rate Amt.Rs. Qty Rate Amt.Rs.

A 600 15 9,000 640 17.50 11,200

B 800 20 16,000 950 18.00 17,100

C 1,000 25 25,000 870 27.50 23,925

Total 2,400 50,000 2,460 52,225

 (1)MaterialCostVariance =Standardcost Actualcost

=Rs.50,000 Rs.52,225

MCV =Rs.2,225(A)

(2)MaterialPriceVariance =(St.Price ActualPrice)xActualQty

MaterialA =(15 17.50)x640=Rs.1,600(A)

MaterialB =(20 18)x950=Rs.1,900(F)

MaterialC =(25 27.50)x870=Rs.2,175(A)

MPV =Rs.1,875(A)

(3)MaterialUsageVariance =(St.Qty ActualQty.)xSt.Price

MaterialA =(600 640)x15=Rs.600(A)

MaterialB =(800 950)x20=Rs.3,000(A)

MaterialC =(1,000 870)x25=Rs.3,250(F)

MUV =Rs.350(A)

Check:

MCV= MPV+MUV
Rs.2,225(A)= Rs.1,875(A)+Rs.350(A)

(4)MaterialMixVariance =(RevisedSt.Qty ActualQty.)xSt.Price

MaterialA =(615* 640)x15=Rs.375(A)

 MaterialB =(820* 950)x20=Rs.2,600(A)

MaterialC =(1,025* 870)x25=Rs.3,875(F)

MMV =Rs.900(F)

*RevisedStandardQuantityiscalculatedasfollows:

MaterialA= 2460x600 =615Units

2400

MaterialB= 2460x800 =820Units
2400
MaterialC= 2460x1,000 =1,025Units
2400

(5)MaterialYieldVariance =(Actualyield Standardyield)xSt.

outputprice

=(1010.25)x5000=Rs.1,250(A)

Check

MCV=MPV+MMV+MYV

Rs.2,225(A)=Rs.1,875(A)+900(F)+Rs.1,250(A)

Problem:3
Formaking10kg.ofyarn,thestandardmaterialrequirementis:
Material Quantity(kg.) Rateperkg.(Rs.)
White 8 6.00
Black 4 4.00
In March, 1,000 kg. of yarn was produced. The actual consumption of
materialsisasunder:
Material Quantity(kg.) Rateperkg.(Rs.)
White 750 7.00
Black 500 5.00
Calculate:(1)MCV(2)MPV(3)MUV

Solution:

Standardfor1000kgs. Actualfor1000kgs.
Particular
Quantity Rate Amount Quantity Rate Amount
A 800 6 4,800 750 7 5,250
B 400 4 1,600 500 5 2,500
Total 1,200 6,400 1,250 7,750
(1)MCV:SCAC
=6,4007,750 =Rs.1,350(A)
(2)MPV:(SPAP)xAQ
A=(67)x750 =Rs.750(A)
B=(45)x500 =Rs.500(A)
=1,250(A)
(3)MUV:(SQAQ)xSP
A=(800750)x6 =Rs.300(F)
B=(400500)x4 =Rs.400(A)
=Rs.100(A)

LabourVariance:
Problem4

CalculateLabourcostvariancefromtheinformation:

Standardproduction :100units

StandardHours :500hours

Wagerateperhour :Rs.2

Actualproduction :85units

Actualtimetaken :450hours

Actualwageratepaid :Rs.2.10perhour

Solution:

Standardtimeforoneunit=500hours100units=5hours

Standardhoursforactualproduction85units=85x5=425hours

LabourcostVariance=(Std.HoursofActualProductionxStd.Rate)
(ActualHoursxActualRate)

=(425HoursxRs.2)(450HoursxRs.2.10)

=(Rs.850Rs.945)

=RS.95(U)

Problem5

StandardwagerateisRs.2perhourandstandardtimeis10hours.Butactual
wagerateisRs.2.25perhourandactualhoursusedare12hours.

CalculateLabourcostvariance.

Solution:
Labourcostvariance=(Std.RatexStd.Hours)(ActualRatexActualHours)

=(Rs.2x10)(Rs.2.25x12)

=Rs.20Rs.27

=Rs.7(U)

Herelabourvarianceisadversebecauseactuallabourcostexceedsstandardcost
byRs.7

Problem6

StandardlabourhoursandrateforproductionofoneunitofArticlePisgiven
below:

PerUnitHour RateperHour Total(Rs.)

Skilledworker 5 1.50 7.50

Unskilledworker 8 0.50 4.00

Semiskilled 4 0.75 3.00

worker

ActualData RateperHour Total(Rs.)

Articlesproduced
1,000units

Skilledworker 2.00 9,000

4,500hour

Unskilledworker 0.45 4,500

10,000hour

Semiskilled 0.75 3,150

worker4,200hour

CalculateLabourcostvariance.

Solution:
Labourcostvariance=(SHforactualproductionxSR)(AHxAR)

Skilledworker=(5,000x1.50)(4,500x2)

=7,5009,000

=Rs.1,500(Adverse)

Unskilledworker=(8,000x0.50)(10,000x0.45)

=4,0004,500

=Rs.500(Adverse)

Semiskilledworker=(4,000x0.75)(4,200x0.75)

=3,0003,150

=Rs.150(Adverse)

TotalLabourcostvariance=Rs.2,150(Adverse)

Problem7
IndiaLtd.Manufacturesaparticularproduct,thestandarddirectlabourcost
ofwhichisRs.120perunitwhosemanufactureinvolvesthefollowing:
Typeofworkers Hours Rate(Rs.) Amount(Rs.)
A 30 2 60
B 20 3 60
50 120
Duringaperiod,100unitsoftheproductwereproduced,theactuallabour
costofwhichwasasfollows:
Typeofworkers Hours Rate(Rs.) Amount(Rs.)
A 3,200 1.50 4,800
B 1,900 4.00 7,600
5,100 12,400
Calculate: (1) Labour cost variance (2) Labour Rate variance (3) Labour
Efficiencyvariance(4)Labourmixvariance.

Solution:

Standardfor100units Actualfor100units
TypeofWorker
Hours Rate Amount Hours Rate Amount
A 3,000 2 6,000 3,200 1.50 4,800
B 2,000 3 6,000 1,900 4.00 7,600
Total 5,000 12,000 5,100 12,400

(1) LCV:SCAC
LCV=12,00012,400 =Rs.400(A)

(2)LRV:(SRAR)xAH
A=(21.50)x3,200 =Rs.1,600(F)
B=(34)x1,900 =Rs.1,900(A)
=Rs.300(A)
(3)LEV:(SHAH)xSR
A=(3,0003,200)x2 =Rs.400(A)
B=(2,0001,900)x3 =Rs.300(F)
=Rs.100(A)

(4)LMV:(RSHAH)xSR
A=(3,0603,200)x2 =Rs.280(A)
B=(2,0401,900)x3 =Rs.420(F)
=Rs.140(F)
Working:RevisedstandardHours:
RSH=St.hoursofthetypexTotalactualhours/TotalSt.hours
A=3,000x5,100/5,000=3,060hrs.
B=2,000x5,100/5,000=2,040hrs.

OverheadVariance:
Problem8

MLMLtd.hasfurnishedyouthefollowinginformationforthemonthof
January:

Budget Actual

Outputs(units) 30,000 32,500

Hours 30,000 33,000

Fixedoverhead 45,000 50,000

Variableoverhead 60,000 68,000

Workingdays 25 26

Calculateoverheadvariances.

Solution:
Necessarycalculations

Standardhourperunit=Budgetedhours=30,000

Budgetedunits30,000

Standardhourforactualoutput=32,500unitsx1hour=32,500
Standardoverheadrateperhour=Budgetedoverheads

Budgetedhours

Forfixedoverhead=45,000=Rs.1.50perunit
30,000
Forvariableoverhead=60,000 =Rs.2perunit
30,000
Standardfixedoverheadrateperday=Rs.45,00025days=Rs.1,800

Recoveredoverhead=StandardhoursforactualoutputxStandardRate

Forfixedoverhead=32,500hoursxRs.1.50=Rs.48,750

Forvariableoverhead=32,500hoursxRs.2=Rs.65,000

Standardoverhead=ActualhoursxStandardRate

Forfixedoverhead=33,000x1.50=Rs.49,500

Forvariableoverhead=33,000x2=Rs.66,000

Revisedbudgetedhours=BudgetedHours xActualdays

BudgetedDays

30,000 x26=31,200hours
25
Revisedbudgetedoverhead=31,200x1.50=Rs.46,800

CalculationofVariances

FixedOverheadVariances:

FixedOverheadCostVariance=RecoveredOverheadActualOverhead

=48,75050,000=Rs.1,250(A)
 FixedOverheadExpenditureVariance=BudgetedOverheadActual
Overhead

=45,00050,000=Rs.5,000(A)

FixedOverheadVolumeVariance=RecoveredOverheadBudgeted
Overhead

=48,75045,000=Rs.3,750(F)

FixedOverheadEfficiencyVariance=RecoveredOverheadStandard
Overhead

=48,75049,500=Rs.750(A)

FixedOverheadCapacityVariance=StandardOverheadRevised
BudgetedOverhead

=49,50046,800=Rs.2,700(F)

CalendarVariance=(ActualdaysBudgeteddays)x

Standardrateperday=
(2625)x1,800=Rs.1,800(F)

VariableOverheadVariances:

VariableOverheadCostVariance=RecoveredOverheadActual
Overhead

=65,00068,000=Rs.3,000(A)

VariableOverheadExpenditureVariance=StandardOverheadActual
Overhead

=66,00068,000=Rs.2,000(A)

VariableOverheadEfficiencyVariance=RecoveredOverheadActual
Overhead=65,00066,000=Rs.1,000(A)