{"id":23226,"date":"2023-05-01T17:43:31","date_gmt":"2023-05-01T12:13:31","guid":{"rendered":"https:\/\/gstguntur.com\/?p=23226"},"modified":"2023-05-01T17:43:31","modified_gmt":"2023-05-01T12:13:31","slug":"standard-costing-ca-inter-costing-question-bank","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/standard-costing-ca-inter-costing-question-bank\/","title":{"rendered":"Standard Costing – CA Inter Costing Question Bank"},"content":{"rendered":"

Standard Costing \u2013 CA Inter Costing Question Bank<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Standard Costing – CA Inter Costing Question Bank<\/h2>\n

Question 1.
\nA company produces a finished product by using three basic raw materials. The following standards have been set-up for raw materials:
\n\"Standard
\nThe standard loss in process is 20% of input. During a particular month, the Company produced 2,400 Kgs. of finished product. The details of stock and purchases for the month are as under:
\n\"Standard
\nThe opening stock is valued at standard cost. Compute:
\n(i) Material price and Material cost variances, when:
\n(a) Variance is calculated at the point of issue of \u2018First-in-First-out\u2019 basis.
\n(b) Variance is calculated at the point of issue on \u2018Last-in-First-out\u2019 basis.
\n(ii) Material Usage variance,
\n(iii) Material Mix variance, and
\n(iv) Material Yield variance. (Nov 2000, 12 marks)
\nAnswer:
\nM1- Actual material used:
\n(i)
\n\"Standard<\/p>\n

(ii) Based on LIFO Method
\n\"Standard<\/p>\n

M2<\/sub>– Standard cost of material used
\n\"Standard<\/p>\n

M3<\/sub> – Standard Cost of Material if it had been used in standard proportion
\n\"Standard<\/p>\n

M4<\/sub> – Standard material cast of output
\n(It is given that output was 2,400 kg. Standard loss in process i$ 20% of Input
\nInput for an output of 2,400 kg = (2400 \u00f7 80) \u00d7 100 = 3,000 kg.
\n\"Standard<\/p>\n

Variance:
\n(i) Material price and cost variance when variance is calculated at the point of issue on “first in first out” basis –
\n(a) Material Price Variance = M1<\/sub> – M2<\/sub> = 8,295 – 7,850 = 445 (A)
\n(b) Material cost Variance = M1<\/sub> – M4<\/sub> = 8,295 – 8,550 = 255 (F)<\/p>\n

(ii) Material price and cost variance when variance is calculated at the point of issue on \u201cLast in first out\u201d basis –
\n(a) Material price variance = M1<\/sub> – M2<\/sub> = 8,430 – 7,850 = 580 (A)
\n(b) Material cost variance = M1<\/sub> – M4<\/sub> = 8,430 – 8,550 = 120 (F)<\/p>\n

(iii) Material Mix variance = M2<\/sub> – M3<\/sub> = 7,850 – 7,980 = 130 (F)<\/p>\n

(iv) Material yield variance = M3<\/sub> – M4<\/sub> = 7,980 – 8,550 = 570 (F)<\/p>\n

(v) Material usage variance = M2<\/sub> – M4<\/sub> = 7,850 – 8550 = 700 (F)<\/p>\n

Question 2.
\nAnswer the following :
\nUV Ltd. presents the following information for November, 2008 :
\nBudgeted production of product P = 200 units.
\nStandard consumption of Raw materials = 2 kg per unit of p.
\nStandard price of material A = \u20b9 6 per kg.
\nActually, 250 units of P were produced and material A was purchased at \u20b9 8 per kg. and consumed at 1.8 kg. per unit of P. Calculate the material cost variances. (Nov 2008, 3 marks)
\nAnswer:
\n\"Standard
\n250 units of P were produced from material A.
\nFor one units of P = 1.8 kg of material A is required, so for 250 units of P = 250 \u00d7 1.8 = 450 kg of material A is required.<\/p>\n

Total Actual cost of output P produced 250 units Actual cost = 250 \u00d7 1.8 \u00d7 8 = \u20b9 3,600
\nStandard cost = For Actual output produced i.e.; 250 units of P, raw material A will be required as in standard consumption ratio of 2 kg. per unit of P. So for 250 units, standard raw material A required = 250 \u00d7 2 = 500 kg. Standard cost per unit of X = \u20b9 6 per kg.
\nSo that standard cost = 500 \u00d7 6 = \u20b9 3,000<\/p>\n

Material Cost Variance = Standard cost – Actual cost
\n= 3000 – 3600 = 600(A)
\nMaterial Price Variance = 2700 – 3600 = 900(A)
\nMaterial Mix Variance = Nil
\nMaterial Yield Variance = 3000 – 2700 = 300(F)
\nMaterial Usage Variance = 3000 – 2700 = 300(F)<\/p>\n

\"Standard<\/p>\n

Question 3.
\nAnswer the following :
\nFollowing details relating to product X during the month of April, 2009 are available :
\nStandard cost per unit of X :
\nMaterials : 50 kg @ \u20b9 40\/kg
\nActual production : 100 units
\nActual material cost: \u20b9 42\/kg
\nMaterial price variance : \u20b9 9,800 (Adverse)
\nMaterial usage variance : \u20b9 4,000 (Favourable)
\nCalculate the actual quantity of material used during the month April, 2009. (May 2009, 2 marks)
\nAnswer:
\nMaterial price variance
\n\"Standard
\nActual quantity of material used during the month of April = 4,900 kg.<\/p>\n

Question 4.
\nAnswer the following:
\nFollowing are the details of the product Phornex for the month of April 2013:
\nStandard quantity of material required per unit 5 kg
\nActual output 1000 units
\nActual cost of materials used \u20b9 7,14,000
\nMaterial price variance \u20b9 51,000 (Fav)
\nActual price per kg of material is found to be less than standard price per kg of material b\u00ff \u20b9 10.<\/p>\n

You are required to calculate:
\n(i) Actual quantity and Actual price of materials used.
\n(ii) Material Usage Variance
\n(iii) Material Cost Variance (5 marks)
\nAnswer:
\n(i) Actual Quantity and Actual Price of Material used:
\nMaterial Price Variance = Actual Quantity (Std. Price – Actual Price)
\n= \u20b9 51,000
\nOr, AQ (SP – AP) = \u20b9 51,000
\nOr, 10AQ = \u20b9 51,000
\nOr, AQ = 5,100 Kgs.
\nActual cost of material used is given i.e.
\nAQ \u00d7 AP = \u20b9 7,14,000
\nor, 5,100 \u00d7 AP = \u20b9 7,14,000
\n\u2234 AP = \u20b9 140
\n\u2234 Actual price is less by \u20b9 10
\nSo, Standard price = \u20b9 140 + \u20b9 10 = \u20b9 150 per kg
\nActual Quantity = 5,100 kgs
\nActual Price = \u20b9 140\/kg<\/p>\n

(ii) Material Usage Variance:
\nStd. Price (Std. Quantity-Actual Quantity)
\nOr, SP (SQ – AQ)
\n= \u20b9 150 (1,000 units \u00d7 5 kg – 5,100 kg) = \u20b9 15,000 (A)<\/p>\n

(iii) Material Cost Variance:
\nStd. Cost – Actual Cost
\n= (SP \u00d7 SO) – (AP \u00d7 AQ)
\n= \u20b9 150 \u00d7 5,000 – \u20b9 140 \u00d7 5,100
\n= \u20b9 7,50,000 – \u20b9 7,14,000 = \u20b9 36,000 (F)<\/p>\n

Question 5.
\nXYZ Limited produces an article and uses a mixture of material X and Y. The standard quantity and price of materials for one unit of output is as under:
\n\"Standard
\nDuring a period, 1500 units were produced. The actual consumption of materials and prsces are given below:
\n\"Standard<\/p>\n

Calculate:
\n(i) Standard cost for actual output
\n(ii) Material cost variance
\n(iii) Material Price variance
\n(iv) Material usage variance (Nov 2017, 8 marks)
\nAnswer:
\nBasic Calculations:
\n\"Standard
\nStandard quantity for Actual output 1000kg.
\n\"Standard
\n(i) Total standard cost for actual output = \u20b9 48,00,000.<\/p>\n

(ii) Material Cost Variance = Skd. cost for actual – Actual cost
\nMCV = \u20b9 48,00,000 – 54,10,000
\n= \u20b9 6.10,000 (A)<\/p>\n

(iii) Material Price Variance = (SP – AP) \u00d7 AQ
\n\"Standard<\/p>\n

(iv) Material Usage Variance
\n\"Standard
\nCheck
\nMCV = MPV + MUV
\n6,10,000 (A) = 4,35,000 (A) + 1,75,000(A)<\/p>\n

\"Standard<\/p>\n

Question 6.
\nBeta Ltd. is manufacturing Product N. This is manufactured by mixing two materials namely Material P and Material Q. The Standard Cost of Mixture is as under:
\nMaterial P 150 ltrs. @ \u20b9 40 per ltr.
\nMaterial Q 100 ltrs. @ \u20b9 60 per ltr.
\nStandard loss @ 20% of total input is expected during production.
\nThe cost records for the period exhibit following consumption:
\nMaterial P 140 ltrs @ \u20b9 42 per ltr.
\nMaterial Q 110 ltrs. @ \u20b9 56 per ltr.
\nQuantity produced was 195 ltrs.
\nCalculate:
\n(i) Material Cost Variance
\n(ii) Material Usage Variance
\n(iii) Material Price Variance (May 2018, 5 marks)
\nAnswer:
\nMaterial – N is moving faster than Material – M
\nCalculation
\n\"Standard
\nStandard cost of actual output = \u20b9 12,000 \u00d7 \\(\\frac{195}{200}\\) = \u20b9 11,700<\/p>\n

Caculation of variance
\n(i) Material Cost Variance = (Standard Cost of Actual Output – Actual Cost)
\n= (\u20b9 11,700 – \u20b9 12,040)
\n= \u20b9 340 (A)<\/p>\n

(ii) Material Usage Variance = (Standard Quantity for actual output – Actual Quantity) \u00d7 Std. Price
\n\"Standard<\/p>\n

(iii) Material Price Variance = (SP – AP) \u00d7 AQ
\n\"Standard<\/p>\n

Question 7.
\nThe standard cost of a chemical mixture is as follows:
\n60% of Material A @ \u20b9 50 per kg
\n40% Material B @ \u20b9 60 per kg
\nA standard loss of 25% on output is expected in production. The cost
\nrecords for a period has shown the following usage.
\n540 kg of Material A @ \u20b9 60 per kg
\n260 kg of Material B @ \u20b9 50 per kg
\nThe quantity processed was 680 kilograms of good product.
\nFrom the above given information
\nCalculate:
\n(i) Material Cost Variance
\n(ii) Material Price Variance
\n(iii) Material Usage Variance
\n(iv) Material Mix Variance
\n(v) Material Yield Variance (Nov 2019, 10 marks)
\nAnswer:
\nBasic Calculation
\n\"Standard
\nStandard Cost of actual output = \u20b9 43,200 \u00d7 \\(\\frac{680}{640}\\)
\n= \u20b9 45,900
\n(i) Material Cost Variance = (Std. Cost of Actual Output – Actual Cost)
\n= (\u20b9 45,900 – \u20b9 45,400)
\n= \u20b9 500 (F)<\/p>\n

(ii) Material Price Variance = (SP – AP) \u00d7 AQ
\n\"Standard<\/p>\n

(iii) Material Usage Variance = (Std. Quantity for Actual Output – Actual Quantity) \u00d7 Std. Price,
\n\"Standard<\/p>\n

(iv) Material Mix Variance = (Revised Std. Qty. – Actual Qty.) \u00d7 Std. Price
\n\"Standard<\/p>\n

(v) Material Yield Variance = (AY \u2014 SY) \u00d7 50P
\nor
\n= (SQ – RSQ) \u00d7 SP
\n\"Standard<\/p>\n

Question 8.
\nJ&J Ltd. produces an article by blending two basic raw materials. The following standards have been set up for raw materials:
\n\"Standard
\nThe standard loss in processing islO%. During March, 2013, the company produced 2,250 kg. of finished output.
\nThe position of stock and purchases for the month of March, 2013 is as under:
\n\"Standard
\nCalculate the following variances:
\n(i) Material price variance
\n(ii) Material usage variance
\n(iii) Materials yield variance
\n(iv) Materials mix variance
\n(v) Material cost Variance
\nAssume FIFO method for issue of material. The opening stock is to be valued at standard price.
\nAnswer:
\nWorking Notes:
\n\"Standard
\n(i) Material Price Variance = Actual Quantity (Std. Rate \u2014 Actual Rate)
\n\"Standard<\/p>\n

(ii) Material Usage Variance = Std. Rate (Standard Quantity – Actual Quantity)
\n\"Standard<\/p>\n

(iii) Material Yield Variance = Std. Rate (Std. Quantity \u2014 Revised Std. Quantity)
\n\"Standard<\/p>\n

(iv) Material mix variance = Std. Rate (Revised Std. Quantity – Actual Quantity)
\n\"Standard<\/p>\n

(v) Material cost variance
\n= Std. Cost \u2014 Actual Cost
\n= 11,000 – 12,577
\n= \u20b9 1,577 (A)<\/p>\n

Question 9.
\nMention the causes that give rise to labour rate variance. (Nov 1999, 5 marks)
\nAnswer:
\nLabour variance arises due to the difference between standard Labour hour rate specified and the actual Labour, hour rate, paid. It is computed by multiplying the actual hours taken by workers on a job by the difference
\nbetween the standard and actual wage rate per hour.
\nMain causes which constitute for the occurrence of Labour rate variance are as below:<\/p>\n

    \n
  1. Increase in actual wage rate per hour paid to workers.<\/li>\n
  2. Payment of special increments or allowances to workers.<\/li>\n
  3. Resorting to excessive overtime.<\/li>\n
  4. Using a gang or mix different from that used for setting labour standard.<\/li>\n
  5. Use of wrong type of labour i.e. for a job requiring the use of non-skilled labour uses skilled labour. Since the wages of skilled labour are more than that of non-skilled labour, therefore this increased wage rate per hour of skilled labour force accounts for the occurrence of labour rate variance.<\/li>\n
  6. Non-anticipated wage increase at the time of setting standards.<\/li>\n<\/ol>\n

    \"Standard<\/p>\n

    Question 10.
    \nThe standard labour employment and the actual labour engaged in a 40 hours week for a job are as under:
    \n\"Standard
    \nActual output: 1,800 units Abnormal Idle time 2 hours in the week Calculate:
    \n(i) Labour Cost Variance
    \n(ii) Labour Efficie\u00f1cy Variance
    \n(iii) Labour Idle Time Variance. (Nov 2012, 6 marks)
    \nAnswer:
    \nWorking Note: Table Showing Standard & Actual Cost
    \n\"Standard<\/p>\n

    Calculation of Variances:<\/p>\n

    (i) Labour Cost Variance = Standard Cost for Actual Output-
    \nActual Cost
    \n(a) Skilled worker = \u20b9 1,05,300 – \u20b9 1,00,000
    \n= \u20b9 5,300 (F)
    \n(b) Semi-skilled worker = \u20b9 21,600 – \u20b9 42,000
    \n= \u20b9 20,400 (A)
    \n(c) Unskilled Worker = \u20b9 8,100 – \u20b9 8,000
    \n= \u20b9 100 (F)
    \nTotal = \u20b9 5,300 (F) + \u20b9 20,400 (A) + \u20b9 100 (F)
    \n= \u20b9 15,000 (A)<\/p>\n

    (ii) Labour Efficiency Variance = Std. Rate \u00d7 (Standard hours – Actual hours worked)
    \n(a) Skilled worker = 45 \u00d7 (2,340 hrs. – 1,900 hrs.)
    \n= \u20b9 19,800(F)
    \n(b) Semi-skifled worker = \u20b9 30 \u00d7 (720 hrs. – 1,140 hrs.)
    \n= \u20b9 12,600 (A)
    \n(c) Unskilled Worker = \u20b9 15 \u00d7 (540 hrs. – 760 hrs.)
    \n= \u20b9 3,300(A)
    \nTotal = \u20b9 19,800 (F) + \u20b9 12,600(A) + \u20b9 3,300 (A)
    \n= \u20b9 3,900 (F)<\/p>\n

    (iii) Labour Idle Time Variance =Std. Rate \u00d7 Idle Time (Hrs.)
    \n(a) Skilled worker = \u20b9 45 \u00d7 100
    \n= \u20b9 4,500 (A)
    \n(b) Semi-skilled worker = \u20b9 30 \u00d7 60 hrs.
    \n= \u20b9 1,800(A)
    \n(c) Unskilled worker = \u20b9 15 \u00d7 40 hrs.
    \n= \u20b9 600(A)
    \nTotal = \u20b9 4,500 (A) + \u20b9 1,800 (A) + \u20b9 600 (A)
    \n= \u20b9 6,900(A)<\/p>\n

    Question 11.
    \nA gang of workers normally consists of 30 skilled workers, 15 semi-skilled workers and 10 unskilled workers. They are paid at standard rate per hour as under:<\/p>\n\n\n\n\n\n
    Skilled<\/td>\n\u20b9 70<\/td>\n<\/tr>\n
    Semi-skilled<\/td>\n\u20b9 65<\/td>\n<\/tr>\n
    Unskilled<\/td>\n\u20b9 50<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    In a normal working week of 40 hours, the gang is expected to produce 2000 units of output. During the week ended 31st<\/sup> March, 2019, the gang consisted of 40 skilled, 10 semi-skilled and 5 unskilled workers. The actual wages paid were at the rate of \u20b9 75, \u20b9 60 and \u20b9 52 per hour respectively. Four hours were lost due to machine breakdown and 1600 units were produced.<\/p>\n

    Calculate the following variances showing clearly adverse (A) or favourable (F)
    \n(i) Labour Cost Variance
    \n(ii) Labour Rate Variance
    \n(iii) Labour Efficiency Variance
    \n(iv) Labour Mix Variance
    \n(v) Labour Idle Time Variance (May 2019, 10 marks)
    \nAnswer:
    \n\"Standard
    \nStd. hrs for actual output are calculated as follows:
    \nSkilled = \\(\\frac{1,600}{2,000}\\) \u00d7 1,200 = 960 hours
    \nSemi skilled = \\(\\frac{1,600}{2,000}\\) \u00d7 400 = 480 hours
    \nUnskilled = \\(\\frac{1,600}{2,000}\\) \u00d7 400 = 320 hours
    \n@ Actual No. of workers \u00d7 40 hours
    \n# St Actual hrs worked \"Standard<\/p>\n

    (i) Labour Cost Variance = (SH \u00d7 SR) – (AH \u00d7 AR)
    \n= (1,14,400 – 1,54,400)
    \n= \u20b9 40,000 (A)<\/p>\n

    (ii)
    \n\"Standard<\/p>\n

    (iii)
    \n\"Standard<\/p>\n

    (iv) Labour Mix Variance
    \n= Total Actual Time Worked (hours) \u00d7 (Average Standard Rate per hour of Standard Gang Less Average Standard Rate per hour of Actual Gang) on the basis of hours worked
    \n= 1,980 \u00d7 \\(\\left(\\frac{\u20b9 1,44,400}{1,760 \\text { hrs. }} \\frac{1,440 \\mathrm{hrs} . \\times \u20b9 70+360 \\mathrm{hrs} . \\times \u20b9 65+180 \\mathrm{hrs} . \\times \u20b950}{1,980 \\mathrm{hrs} .}\\right)\\)
    \n= \u20b9 4,500(A)<\/p>\n

    (v)
    \n\"Standard<\/p>\n

    Question 12.
    \nThe following information has been provided by a company:
    \nNumber of units produced and sold : 6,000
    \nStandard labour rate per hour : \u20b9 8
    \nStandard hours required for 6,000 units : \u2014
    \nActual hours required : 17,094 hours
    \nLabour efficiency : 105.3%
    \nLabour rate variance : \u20b9 68,376 (A)<\/p>\n

    You are required to calculate:
    \n(i) Actual labour rate per hour
    \n(ii) Standard hours required for 6,000 units
    \n(iii) Labour Efficiency variance.
    \n(iv) Standard labour cost per unit
    \n(v) Actual labour cost per unit
    \nAnswer:
    \nSR \u2014 Standard labour Rate per Hour
    \nAR \u2014 Actual labour rate per hour
    \nSH \u2014 Standard Hours
    \nAH – Actual hours<\/p>\n

    (i) Actual labour rate per hour:
    \nLabour rate Variance = AH (SR \u2014 AR)
    \n= 17,094 (\u20b9 8 – AR) = 68,376 (A) = – 68,376
    \n= \u20b9 8 – AR = -4
    \nOr, AR = \u20b9 12<\/p>\n

    (ii) Standard hour required for 6,000 units:
    \nLabour Efficiency = \\(\\frac{\\mathrm{SH}}{\\mathrm{AH}}\\) \u00d7 100 = 105.3
    \n= SH \\(=\\frac{\\mathrm{AH} \\times 105.3}{100}\\) \\(=\\frac{17094 \\text { hours } \\times 105.3}{100}\\)
    \n= 17,999.982 or, SH = 18,000 hours<\/p>\n

    (iii) Labour Efficiency Variance = SR (SH \u2014 AH)
    \n= \u20b9 8 (18,000 – 17,094)
    \n= 8 \u00d7 906 = \u20b9 7,248 (F)<\/p>\n

    (iv) Standard Labour Cost per Unit \\(=\\frac{18,000 \\text { hours } \\times \u20b9 8}{6,000 \\text { unit }}\\) = \u20b9 24<\/p>\n

    (v) Actual Labour cost per unit \\(=\\frac{17,094 \\text { hours } \\times 12}{6,000 \\text { unit }}\\) = \u20b9 34.19<\/p>\n

    \"Standard<\/p>\n

    Computation of variances : Overhead Variance<\/p>\n

    Question 13.
    \nThe activity ratio of a concern is 95.6% whereas the capacity ratio is 105%. What is the efficiency ratio? (May 2000, 2 marks)
    \nAnswer:
    \nActivity ratio \\(=\\frac{\\text { Standard hours required for actual production }}{\\text { Budgeted hours }}\\) \u00d7 100
    \n= 95.6%
    \nCapacity ratio \\(=\\frac{\\text { Actual hours worked }}{\\text { Budgeted hours }}\\) \u00d7 100 = 105%
    \nEfficiency ratio \\(=\\frac{\\text { Standard hours required for actual production }}{\\text { Actual hours worked }}\\) \u00d7 100
    \n= \\(\\frac{95.6}{105}\\) \u00d7 100 = 91.047%<\/p>\n

    Question 14.
    \nA company has normal capacity of 100 machines working 8 hours per day of 25 days in a month. The budgeted fixed overheads of a month are \u20b9 1,50,000. The standard time required to manufacture one unit of product is 4 hours. In a particular month the Company worked for 24 days of 750 machine hours per day and produced 4,500 units of the product. The actual fixed overheads incurred were \u20b9 1,45,000 Compute:
    \n(a) Efficiency variance.
    \n(b) Capacity variance
    \n(c) Calendar variance
    \n(d) Expenditure variance
    \n(e) Volume variance
    \n(f) Total fixed overhead variance (May 2001, 10 marks)
    \nAnswer:
    \n\\(\\mathrm{Fo}_1\\) – Actual fixed overhead : 1,45,000
    \n\\(\\mathrm{Fo}_2\\) – Budgeted fixed overhead for the period or Standard fixed overhead : 1,50,000
    \n\\(\\mathrm{Fo}_3\\) – Fixed overhead for days\/hours available of Standard rate during the year (\u20b9 150,000 \u00f7 25 days) \u00d7 24 days : 1,44,000
    \n\\(\\mathrm{Fo}_4\\) – Fixed overhead for actual hour worked during
    \nThe year
    \n(8,000 hours \u00d7 \u20b9 7.50) : 1,35,000
    \n\\(\\mathrm{Fo}_5\\) – Standard fixed overhead for actual production 4500 \u00d7 \u20b9 30 : 1,35,000<\/p>\n

    Variance:
    \n(1) Fixed overhead expenditure variance = \\(\\mathrm{Fo}_1\\) – \\(\\mathrm{Fo}_2\\)
    \n= 1,45,000 – 1,50,000 = 5,000 (F)<\/p>\n

    (2) Fixed overhead calender variance = \\(\\mathrm{Fo}_2\\) – \\(\\mathrm{Fo}_3\\)
    \n= 1,50,000 – 1,44,000 = 6,000 (A)<\/p>\n

    (3) Fixed overhead capacity variance = \\(\\mathrm{Fo}_3\\) – \\(\\mathrm{Fo}_4\\)
    \n= 1,44,000 – 1,35,000 = 9,000 (A)<\/p>\n

    (4) Fixed overhead efficiency variance = \\(\\mathrm{Fo}_4\\) – \\(\\mathrm{Fo}_5\\)
    \n= 1,35,000 – 1,35,000 = Nil<\/p>\n

    (5) Fixed overhead variance = \\(\\mathrm{Fo}_1\\) – \\(\\mathrm{Fo}_5\\)
    \n= 1,45,000 – 1,35,000 = 10,000 (A)<\/p>\n

    (6) Fixed overhead volume variance = \\(\\mathrm{Fo}_2\\) – \\(\\mathrm{Fo}_5\\)
    \n= 1,50,000 – 1,35,000 = 15,000 (A)<\/p>\n

    Question 15.
    \nOverhead variances should be viewed as interdependent rather than independent. Explain. (May 2006, 4 marks)
    \nAnswer
    \nOverhead variances occur due to the difference between actual overheads and absorbed overheads. Therefore, if we have to calculate an overhead variance, we have to know the amount of the actual overheads and that of absorbed overheads.
    \nThe actual overheads can be known only at the end of the accounting pe\u00f1od when the expense accounts are finalized.
    \nThe absorbed overheads are the overheads charged to each unit of production on the basis of a predetermined overhead rate.<\/p>\n

    Such pre-determined rate is also known as standard overhead recovery rate, or standard overhead absorption rate or standard burden rate.
    \nTo calculate the standard overhead recovery rate, we have to first make an estimate of the likely overhead expenses for each department for the next year.
    \nThe estimate of budget of the overheads is to be divided into fixed and variable elements.
    \nAn estimate of the level of normal capacity utilization is then made either in terms of production or machine hours or direct labour hours.
    \nThe estimated overheads are divided by the estimated capacity level to calculate the pro-determined. Overhead absorption rate as shown below:
    \nStd. Fixed Overhead Rate \\(=\\frac{\\text { Budgeted fixed overheads }}{\\text { Normal volume }}\\)
    \nStd. Variable Overhead Rate \\(=\\frac{\\text { Budgeted variable overheads }}{\\text { Normal volume }}\\)<\/p>\n

    Question 16.
    \nSJ Ltd. has furnished the following information :
    \nStandard overhead absorption rate per unit : \u20b9 20
    \nStandard rate per hour : \u20b9 4
    \nBudgeted production : 15,000 units
    \nActual production : 15,560 units
    \nActual overheads were \u20b9 2,95,000 out of which \u20b9 62,500 fixed.
    \nActual hours : 74,000
    \nOverheads are based on the following flexible budget.
    \n\"Standard
    \nYou are required to calculate the following overhead variances (on hour\u2019s basis) with appropriate workings:
    \n(i) Variable overhead efficiency and expenditure variance.
    \n(ii) Fixed overhead efficiency and capacity variance. (May 2012, 8 marks)
    \nAnswer:
    \nWorkings:
    \n(a) Variable overhead rate per unit
    \n= Difference in total overheads at two levels\/Difference in out-put at two level
    \n= (2,70,000 – 2,10,000) \/(14,000 – 10,000) = 60,000\/ 4,000 = \u20b9 15 per unit
    \n(b) Fixed overhead = 2,70,000 – (14,000 \u00d7 15) = \u20b9 60,000
    \n(c) Standard Fixed Overhead Rate Per Hour = 4 – 3 = 1
    \n(d) Standard Hour Per Unit = Standard OH rate per unit\/standard overhead rate per hour = 20\/4 = 5 hours
    \n(e) Actual Variable Overhead = 2,95,000 – 62,500 = 2,32,500
    \n(f) Actual Variable Overhead Per Hour = 2,32,500\/74,000 = 3.1419
    \n(g) Budgeted hours = 15,000 \u00d7 5 = 75,000 hours
    \n(h) Standard variable overhead rate per hour
    \n= Variable overheads\/budgeted hours = 15,000 \u00d7 15\/75,000 = \u20b9 3.00 per hour
    \n(i) Standard Hour’s for Actual Production = 15,560 \u00d7 5 = 77,800 hours<\/p>\n

    (i) Variable Overhead efficiency and expenditure Variance:
    \nVariable overhead efficiency variance
    \n= Standard Rate Per hour (Std. Hours – Actual Hours)
    \n= 3 (77,800 – 74,000) = 11,400(F)
    \nVariable overhead expenditure variance
    \n= Actual Hours (Std. Rate Per Hour- Actual Rate Per Hour)
    \n= 74,000 (3 – 3.1419) = 10,500 (A)<\/p>\n

    (ii) Fixed overhead efficiency and expenditure variance:
    \nFixed overhead efficiency Variance = Std. Rate per Hour (Std. Hours-Actual Hours)
    \n= \u20b9 1 (77,800 – 74,000) = 3,800 (F)
    \nFixed overheads Capacity variance = Std. Rate Per Hour(Actual Hours – Budgeted Hours)
    \n= 1 (74,000 – 75,000)
    \n= 74,000 – 75,000 = 1,000 (A)
    \nStandard Fixed overhead rate per hour is calculated with the help of budgeted hours and the Fixed overhead efficiency and expenditure variance is calculated as follows:
    \nStandard fixed overhead rate per hour
    \n= Fixed overheads\/budgeted hours = 60,000\/75,000 = \u20b9 0.80 per hour<\/p>\n

    (ii) Fixed overhead efficiency and capacity variance:
    \nFixed overhead efficiency Variance
    \n= Std. Rate per hour (Std. hours – Actual hours)
    \n= \u20b9 0.80 (15.560 \u00d7 5 – 74,000)
    \n= \u20b9 3.040(F)
    \nFixed overhead capacity variance
    \n= Std. Rate per hour (Actual hours – Budgeted hours)
    \n= \u20b9 0.80 (74,000 – 15,000 \u00d7 5)
    \n= \u20b9 800 (A)<\/p>\n

    \"Standard<\/p>\n

    Question 17.
    \nXYZ Co. Ltd. provides the following information:
    \n\"Standard
    \nYou are required to calculate following overhead variances:
    \n(a) Variable Overhead Variance
    \n(b) Fixed Overhead Variance
    \n(i) Expenditure Variance
    \n(ii) Volume Variance (May 2014, 8 marks)
    \nAnswer:
    \n(a) Calculation of Variable Overhead Variance:<\/p>\n

    (i) Variable overhead cost variance:
    \n= (Std. hrs. for Actual prod.\u201d \u00d7 Std. OHS rate) – Actual overhead cost.
    \n= (19 \u00d7 600) – 12,000 = 600 (A)<\/p>\n

    (ii) Variable efficiency variance:
    \n= (Std. hrs. for actual prod.” – Actual hours) \u00d7 Std. overhead rate.
    \n= (19 – 21) \u00d7 600
    \n= 1,200 (A)<\/p>\n

    (iii) Variable overhead Expenditure variance:
    \n= (Actual hours \u00d7 Std. variable overhead fate) – Actual overhead cost
    \n= (21 \u00d7 600) – 12,000
    \n= 12,600 – 12,000 ‘
    \n= 600(F)
    \n*Verification
    \nVariable cost variance:
    \n= V.O. exp. variance \u00d7 V.O. efficiency variance
    \n= 600 F – 1,200 (A)
    \n= 600(A)<\/p>\n

    (b) Calculation of Fixed Overhead Variance:
    \n(i) Fixed overhead expenditure variance:
    \n= (Std. hours \u00d7 Std. rate) – Actual overhead.
    \n= (20 \u00d7 2,000) – 39,000
    \n= 40,000 – 39,000
    \n= 1,000 (F)<\/p>\n

    (ii) Fixed overhead volume variance:
    \n= (Std. hours for actual output – Std. hours) \u00d7 Std. fixed overhead rate
    \n= (19 – 20) \u00d7 2,000
    \n= 2,000 (A).<\/p>\n

    Question 18.
    \nQS Limited has furnished the following information:
    \nStandard overhead absorption rate per unit : \u20b9 20
    \nStandard rate per hour : \u20b9 4
    \nBudgeted production : 12000 units
    \nActual production : 15560 units
    \nActual working hours : 74000
    \nActual overheads amounted to \u20b9 2,95,000, out of which \u20b9 62,500 are fixed. Overheads are based on the following flexible budget:
    \n\"Standard<\/p>\n

    Calculate following overhead variances on the basis of hours:
    \n(i) Variable overhead efficiency variance.
    \n(ii) Variable overhead expenditure variance.
    \n(iii) Fixed overhead efficiency variance. (May 2015, 8 marks)
    \nAnswer:
    \nWorkings:
    \n(a) Variable Overhead rate per unit
    \n\\(=\\frac{\\text { Difference of Overhead at two level }}{\\text { Difference in Production units }}\\)
    \n\\(=\\frac{\u20b9 2,10,000-\u20b9 1,80,000}{10,000 \\text { units }-8,000 \\text { units }}\\) = \u20b9 15
    \n(b) Fixed Overhead = \u20b9 1,80,000 – (8,000 units \u00d7 \u20b9 15) = \u20b9 60,000
    \n(c) Standard hours per unit of production
    \n\\(=\\frac{\\text { Std. Overhead Absorption Rate }}{\\text { Std. Rate per hour }}\\) \\(=\\frac{\u20b9 20}{\u20b9 4}\\) = 5 hours
    \n(d) Standard Variable Overhead Rate per hour
    \n\\(=\\frac{\\text { Variable Overhead per unit }}{\\text { Std. hour per unit }}\\) \\(=\\frac{\u20b9 15}{5 \\text { hours }}\\) = \u20b9 3
    \n(e) Standard Fixed Overhead Rate per hour = \u20b9 4 – \u20b9 3 = \u20b9 1
    \n(f) Actual Variable Overhead = \u20b9 2,95,000 – \u20b9 62,500 = \u20b9 2,32,500
    \n(g) Actual Variable Overhead Rate per Hour \\(=\\frac{\u20b9 2,32,500}{74,000 \\text { hours }}\\)
    \n= \u20b9 3.1419
    \n(h) Budgeted hours = 12,000 units \u00d7 5 hours = 60,000 hours
    \n(i) Standard Hours for Actual Production = 15,560 units \u00d7 5 hours
    \n= 77,800 hours<\/p>\n

    (i) Variable Overhead Efficiency Variance:
    \n= Std. Rate per hour (Std. Hours – Actual Hours)
    \n= \u20b9 3 (77,800 hours – 74,000 hours)
    \n= \u20b9 11,400(F)<\/p>\n

    (ii) Variable Overhead Expenditure Variance:
    \n= Actual Hours (Std. Rate – Actual Rate)
    \n= 74,000 hours (\u20b9 3 – \u20b9 3.1419)
    \n= \u20b9 10,500(A)<\/p>\n

    (iii) Fixed Overhead Efficiency Variance:
    \n= Std. Rate per Hour (Std. Hours-Actual Hours)
    \n= \u20b9 1 (77,800 hours – 74,000 hours)
    \n= \u20b9 3.800(F)<\/p>\n

    (iv) Fixed Overhead Capacity Variance:
    \n= Std. Rate per Hour (Actual Hours – Budgeted Hours)
    \n= \u20b9 1 (74,000 hours – 60,000 hours)
    \n= \u20b9 74,000 – \u20b9 60,000 = \u20b9 14,000(F)<\/p>\n

    Question 19.
    \nAnswer the following:
    \nAB Ltd. has furnished the following
    \n\"Standard
    \nBudgeted fixed overhead rate is \u20b9 1.00 per hour. In July 2016, the actual hours worked were 31,500. In relation to fixed overheads, calculate:
    \n(i) Efficiency Variance
    \n(ii) Capacity Variance
    \n(iii) Calendar Variance
    \n(iv) Volume Variance
    \n(v) Expenditure Variance
    \nAnswer:
    \nCalculation of Fixed Overheads Variances
    \nOutput Absorbed = Actual Production \u00d7 Budgeted Fixed O.H. p\/unit
    \nOH (F1<\/sub>) = 22,000 \u00d7 \u20b9 1.50 p\/unit
    \n= 33,000
    \nInput Absorbed = Actual hrs. \u00d7 Budgeted Fixed O.H. p\/hour
    \nOH(F2<\/sub>) = 31,500hrs. \u00d7 \u20b9 1
    \n= 31,500
    \nPossible OH (F3<\/sub>) = Possible Production \u00d7 Budgeted Fixed O.H.
    \n= (per\/unit)
    \n= 21,600 units \u00d7 \u20b9 1.50 p\/unit
    \n= \u20b9 32,400
    \nBudgeted OH (F4<\/sub>) = \u20b9 30,000
    \nActual OH (F5<\/sub>) = \u20b9 31,000
    \nBudgeted FOH per unit \\(=\\frac{\\text { Budgeted OHCost }}{\\text { Budgeted output }}\\) \\(=\\frac{\u20b9 30,000}{20,000 \\text { units }}\\) = \u20b9 1.50 per unit
    \nPossible Production = Actual Days \u00d7 Std. Production in 1 day
    \n\"Standard<\/p>\n

    Calculation of FOH Variances<\/p>\n

      \n
    1. F.OH Efficiency Variance = F1 – F2 = 33000 – 31500 = 1500(F)<\/li>\n
    2. F.OH Capacity Variance = F2 – F3 = 31500 – 32400 = 900(A)<\/li>\n
    3. F.OH Calendar Variance = F3 – F4 = 32400 – 30000 = 2400(F)<\/li>\n
    4. F.OH Volume Variance = F1 – F4 = 33000 – 30000 = 3000(F)<\/li>\n
    5. F.OH Expenditure Variance = F4 – F5 = 30000 – 31000 = 1000(A)<\/li>\n<\/ol>\n

      Question 20.
      \nA manufacturing concern has provided following information related to fixed overheads:
      \n\"Standard<\/p>\n

      Compute:
      \n(i) Fixed overhead variance
      \n(ii) Fixed overhead expenditure variance
      \n(iii) Fixed overhead volume variance
      \n(iv) Fixed overhead efficiency variance (Nov 2018, 5 marks)
      \nAnswer:
      \nStandard Fixed Overhead Rate per unit \\(=\\frac{\u20b9 5,00,000}{5000 \\text { units }}\\) = \u20b9 100<\/p>\n

      (i) Fixed Overhead Variance:
      \n– (Absorbed Fixed Overhead – Actual Fixed Overhead)
      \n= 1(4800 units \u00d7 \u20b9 100) – \u20b9 4,90,000]
      \n= \u20b9 10,000 (Adverse)<\/p>\n

      (ii) Fixed Overhead Expenditure Variance:
      \n= Budgeted Overhead – Actual Overhead
      \n= (\u20b9 5,00,000 – \u20b9 4,90,000)
      \n= \u20b9 10,000 (Favourable)<\/p>\n

      (iii) Fixed Overhead Volume Variance:
      \nRecovered Overhead – Budgeted Overhead
      \n= [(4800 units \u00d7 \u20b9 100) – \u20b9 5,00,000)
      \n= \u20b9 20,000 (Adverse)<\/p>\n

      (iv) Fixed Overhead Efficiency Variance:
      \nStd Fixed OH \u2014 Budgeted Fixed OH for Actual days
      \n= 4,80000 \u2014 ((5,00,000 \u00f7 25) \u00d7 23] = 20,000 (F)<\/p>\n

      Question 21.
      \nABC Ltd. has furnished the following information regarding the overheads for the month of June 2020 :<\/p>\n

      (i) Fixed Overhead Cost Variance : \u20b9 2,800(Adverse)
      \n(ii) Fixed Overhead Volume Variance : \u20b9 2,000(Adverse)
      \n(iii) Budgeted Hours for June, 2020 : 2,400 hours
      \n(iv) Budgeted Overheads for June, 2020 : \u20b9 12,000
      \n(v) Actual rate of recovery of overheads : \u20b9 8 Per Hour<\/p>\n

      From the above given information
      \nCalculate :
      \n(1) Fixed Overhead Expenditure Variance
      \n(2) Actual Overheads Incurred
      \n(3) Actual Hours for Actual Production
      \n(4) Fixed Overhead Capacity Variance
      \n(5) Standard Houis for Actual Production
      \n(6) Fixed Overhead Efficiency Variance (Nov 2020, 10 marks)<\/p>\n

      Question 22.
      \nPremier Industries has a small factory where 52 workers are employed on an average for 25 days a month and they work 8 hours per day. The normal down time is 15%. The firm has introduced standard costing for cost control. Its monthly budget for November; 2020 shows that the budgeted variable and fixed overhead are \u20b9 1,06,080 and \u20b9 2,21,000 respectively. The firm reports the following details of actual performance for November, 2020, after the end of the month:
      \nActual hours worked : 8,100 hrs.
      \nActual production expressed in standard hours : 8,800 hrs.
      \nActual Variable Overheads : \u20b9 1,02,000
      \nActual Fixed Overheads : \u20b9 2,00,000<\/p>\n

      You are required to calculate:<\/p>\n

      (i) Variable Overhead Variances :
      \n(a) Variable overhead expenditure variance.
      \n(b) Variable overhead efficiency variance.<\/p>\n

      (ii) Fixed Overhead Variances :
      \n(a) Fixed overhead budget variance.
      \n(b) Fixed overhead capacity variance.
      \n(c) Fixed overhead efficiency variance.<\/p>\n

      (iii) Control Ratios:
      \n(a) Capacity ratio.
      \n(b) Efficiency ratio.
      \n(c) Activity ratio. (Jan 2021, 10 marks)<\/p>\n

      \"Standard<\/p>\n

      Question 23.
      \nA Company manufacturing two products uses standard costing system. The following data relating to April, 2000 have been furnished to you:
      \n\"Standard
      \nUnits processed\/in Process
      \nBeginning of the month: All materials applied
      \n\"Standard
      \nYou may use average cost method to analyse.
      \nThe following were the actual costs recorded during the month:
      \nDirect materials purchased at standard price amount to \u20b9 2,00,000 and actual cost of which is \u20b9 2,20,000. Direct materials used for consumption at standard price amount to \u20b9 1,75,000.
      \nDirect wages for actual hours worked at standard wages rates were \u20b9 4,20,000 and at actual wage rates were \u20b9 4,12,000.
      \nFixed overheads budgeted were \u20b9 8,25,000 and actual fixed overheads incurred were \u20b9 8,50,000.<\/p>\n

      Required:<\/p>\n

      (i) Direct material price variance at the point of consumption and at the point of purchase.
      \n(ii) Direct material usage variance.
      \n(iii) Direct wage rate and efficiency variance.
      \n(iv) Fixed overheads volume and expenditure variance.
      \n(v) Standard cost of WIP at the end of the month. (May 2000, 12 marks)
      \nAnswer:
      \n(i) Direct material price variance at the point of consumption.
      \nM1<\/sub> = Actual Quantity \u00d7 Actual Price.
      \n= 1,75,000 \u00d7 \\(\\frac{2,20,000}{2,00,000}\\)
      \n= \u20b9 1,92,500
      \nM2<\/sub> = Actual quantity \u00d7 std price = \u20b9 1,75,000
      \nMaterial price variance = M1<\/sub> – M2<\/sub> = 1,92,500 – 1,75,000
      \n= 17,500(A)
      \nDirect material price variance (at the point of purchase)
      \nM1<\/sub> = Actual quantity of material purchased \u00d7 Actual Price = \u20b9 2,20,000 (given)
      \nM2<\/sub> = Actual quantity of material purchased \u00d7 Std price = \u20b9 2,00,000 (given)
      \nMPV = M1<\/sub> – M2<\/sub>
      \n= \u20b9 2,20,000 – \u20b9 2,00,000
      \n= \u20b9 20,000 (A)<\/p>\n

      (ii) Material usage variance = M2<\/sub> – M4<\/sub>
      \nM2<\/sub> = AQ \u00d7 S P
      \n= \u20b9 1,75,000 given
      \n\"Standard
      \nDirect material usage variance = \u20b9 1,76,000 – \u20b9 1,75,000 = \u20b9 1,000(F)<\/p>\n

      (iii) Direct wage rate and efficiency variance : wage rate variance = L1<\/sub> – L2<\/sub>
      \nL1<\/sub> = Actual labour hour \u00d7 actual rate = \u20b9 4,12,000 (given)
      \nL2<\/sub> = Actual labour hour \u00d7 std rate
      \n= \u20b9 4,20,000 (given)
      \nWage rate variance = L1<\/sub> – L2<\/sub> = \u20b9 4,12,000 – \u20b9 4,20,000 = \u20b9 8,000 (F)
      \nEfficiency variance = L2<\/sub> – L5<\/sub>
      \nL2<\/sub> = \u20b9 4,20,000
      \nL5<\/sub> = Std labour hour \u00d7 std rate
      \n\"Standard
      \nEfficiency variance = L2<\/sub> – L5<\/sub>
      \n= \u20b9 4,20,000 – \u20b9 3,56,800
      \n= \u20b9 63,200 (A)<\/p>\n

      (iv) Fixed over head volume and expenditure variance
      \nF1<\/sub> = Actual fixed overhead
      \n= \u20b9 8,50,000
      \nF2<\/sub> = Budgeted fixed overhead
      \nF2<\/sub> = \u20b9 8,25,000
      \nl5<\/sub> = Std fixed overhead for production
      \n\"Standard
      \nFixed overhead expenditure variance
      \n= F1<\/sub> – F2<\/sub>
      \n= \u20b9 8 50,000 – \u20b9 8,25,000
      \n= \u20b9 25000 (A)
      \nVolume variance = F2<\/sub> – F5<\/sub>
      \n= \u20b9 8,25,000 – \u20b9,13,600 = \u20b9 1,11,400 (A)<\/p>\n

      (v) Std Cost of WIP
      \n\"Standard
      \nProduct A = \u20b9 1,69,600
      \nProduct B = \u20b9 2,20,800<\/p>\n

      Working Notes :
      \nEquivalent Production Statement Using average cost method<\/p>\n

      Material Labour & overhead
      \n\"Standard<\/p>\n

      Question 24.
      \nA single product company has prepared the following cost sheet based on 8,000 units of output per month:
      \n?
      \n\"Standard
      \nThe flexible budget for factory overheads is as under:
      \n\"Standard<\/p>\n

      The actual results for the month of October, 2002 are given below:<\/p>\n

        \n
      • Direct Materials purchased and consumed were 11,224 kg at \u20b9 2,66,570.<\/li>\n
      • Direct Labour hours worked were 22,400 and Direct Wages paid amounted to \u20b9 96,320.<\/li>\n
      • Factory overheads incurred amounted to \u20b9 96,440 out of which the variable overhead is \u20b9 2.60 per Direct Labour hour worked.<\/li>\n
      • Actual output is 7.620 units.<\/li>\n
      • Work-in-process:<\/li>\n<\/ul>\n

        Opening WIP: 300 units:
        \nMaterials 100% complete
        \nLabour and Overheads 60% complete
        \nClosing WIP : 200 units:
        \nMaterials 50% complete
        \nLabour and Overheads 40% complete
        \nYou are required to analyse the variances. (Nov 2002, 12 marks)
        \nAnswer:
        \nMaterial Variances:
        \nM1<\/sub> = Actual cost of actual material used
        \n= AQ \u00d7 AP
        \n= 11,224 \u00d7 2375
        \n= 2,66.570<\/p>\n

        M2<\/sub> = Std. cost of actual material used
        \n= AQ \u00d7 SP
        \n= 11,224 \u00d7 24
        \n= 2,69,376<\/p>\n

        M4<\/sub> = Std. cost of Std. Material used.
        \n= SQ \u00d7 SP
        \n= 7,420 \u00d7 1.5 \u00d7 24 (refer working notes for Std. quantity)
        \n= 2,67,120
        \nMaterial Price variance = M1<\/sub> – M2<\/sub>
        \n= 2,66,570 – 2,69,376
        \n= 2,806(F)
        \nMaterial usage variance = M2<\/sub> – M4<\/sub>
        \n= 2,69,376 – 2,67,1 20
        \n= 2,256 (A)
        \nMaterial cost variance = M1<\/sub> – M4<\/sub>
        \n= 2,66,570 – 2,67,120
        \n= 550(F)<\/p>\n

        Labour Variances:-<\/p>\n

        L1<\/sub> = AHA \u00d7 AR
        \n= 22400 hours \u00d7 \u20b9 4.30 = \u20b9 96,320<\/p>\n

        L2<\/sub> = AHA \u00d7 SR
        \n= 22400 hours \u00d7 \u20b9 4 = \u20b9 89,600<\/p>\n

        L5<\/sub> = SH \u00d7 SR
        \n= 7520** \u00d7 3 \u00d7 4 (refer working notes for Std hours)
        \n= \u20b9 90,240<\/p>\n

        Labour cost variance = L1<\/sub> – L5<\/sub>
        \n= \u20b9 96,320 – \u20b9 90,240
        \n= \u20b9 6,080 (A)<\/p>\n

        Labour rate variance = L1<\/sub> – L2<\/sub>
        \n= \u20b9 96,320 – 89,600
        \n= \u20b9 6,720(A)<\/p>\n

        Labour efficiency variance = L2<\/sub> – L1<\/sub>
        \n= 89,600 – 90,240
        \n= \u20b9 640(F)<\/p>\n

        Variable Overhead Variance<\/p>\n

        V1<\/sub> = Actual variable overhead
        \n= 22,400 \u00d7 2.60 = \u20b9 58,240<\/p>\n

        V2<\/sub> = Std. variable overhead for actual Hours.
        \nAHA \u00d7 SR
        \n= 22,400 \u00d7 2.40*
        \n= \u20b9 53,760<\/p>\n

        V3<\/sub> = AY \u00d7 SR\/unit = 7,520 \u00d7 \u20b9 7.20**
        \n= \u20b9 54,144<\/p>\n

        Variable overhead expenditure variance = V1<\/sub> – V2<\/sub>
        \n= \u20b9 58,240 – \u20b9 53,760
        \n= \u20b9 4,480 (A)<\/p>\n

        VOH efficiency variance = V2<\/sub> – V3<\/sub>
        \n= \u20b9 53,760 – \u20b9 54,144
        \n= \u20b9 384(F)<\/p>\n

        VOH cost variance = V1<\/sub> – V3<\/sub>
        \n= \u20b9 58,240 – \u20b9 54,144
        \n= \u20b9 4,096 (A)<\/p>\n

        *Standard Rate \\(=\\frac{\\text { Budgeted variable overhead }}{\\text { Budgeted hours. }}\\)
        \n= \\(\\frac{96,000-38,200}{8,000 \\times 3}\\)
        \n= \\(\\frac{57,800}{24,000}\\)
        \n= \u20b9 2.40\/hour<\/p>\n

        Fixed overhead variance:<\/p>\n

        F1<\/sub> = Actual fixed overhead
        \n= 96,440 – 58,240
        \n= 38,200<\/p>\n

        F2<\/sub> = Budgeted fixed overhead
        \n= 96,000 – 57,600
        \n= 38,400<\/p>\n

        F3<\/sub> = SR \u00d7 ADA
        \n= Not applicable<\/p>\n

        F4<\/sub> = AHW \u00d7 SR*
        \n= 22,400 \u00d7 1.60
        \n= 35,840<\/p>\n

        F5<\/sub> = AY \u00d7 SR \/ unit **
        \n= 7,520 \u00d7 \u20b9 4.80
        \n= \u20b9 36,096<\/p>\n

        Fixed overhead cost variance = F1<\/sub> – F5<\/sub>
        \n= \u20b9 38,200 – \u20b9 36,096
        \n= \u20b9 2,104 (A)<\/p>\n

        Fixed overhead expenditure variance = F4<\/sub> – F2<\/sub>
        \n= \u20b9 38,200 – \u20b9 38,400
        \n= \u20b9 200 (F)<\/p>\n

        Fixed overhead capacity variance = F2<\/sub> – F4<\/sub>
        \n= \u20b9 38,400 – \u20b9 35,840 = \u20b9 2,560 (A)<\/p>\n

        Fixed overhead efficiency variance = F4<\/sub> – F5<\/sub>
        \n= \u20b9 35,840 – \u20b9 36,096
        \n= \u20b9 256(F)<\/p>\n

        Fixed overhead volume variance = F2<\/sub> – F5<\/sub>
        \n= \u20b9 38,400 – \u20b9 36,096 = \u20b9 2,304
        \n* SR \/ hour \\(=\\frac{\\text { Budgeted fixed overhead }}{\\text { Budgeted hours worked }}\\)
        \n= \\(\\frac{38,400}{24,000}\\)
        \n= \u20b9 1.60\/hour<\/p>\n

        ** SR \/ unit \\(=\\frac{\\text { Budgeted fixed overhead }}{\\text { Budgeted output }}\\)
        \n= \\(\\frac{38,400}{8,000}\\)
        \n= 4.80 \/ unit<\/p>\n

        Working Notes:<\/p>\n

        (1) Direct Material units in actual output:
        \n\"Standard<\/p>\n

        (2)
        \n\"Standard<\/p>\n

        Question 25.
        \nC Preserves produces Jams, Marmalade and Preserves. All the products are produced in a similar fashion; the fruits are cooked at low temperature in a vacuum process and then blended with glucose syrup with added citric acid and pectin to help setting.<\/p>\n

        Margins are tight and the firm operates, a system of standard costing for each batch of Jam.
        \nThe standard cost data for a batch of raspberry jam are.
        \nFruits extract 400 kgs @ \u20b9 16 per kg.
        \nGlucose syrup 700 kgs @ \u20b9 10 per kg.
        \nPectin 99 kgs @ \u20b9 33.2 per kg.
        \nCitricacid 1 kg at \u20b9 200 per kg.
        \nLabour 18 hours @ \u20b9 32.50 per hour.
        \nStandard processing loss 3%.<\/p>\n

        The climate conditions proved disastrous for the raspberry crop. As a consequence, normal prices in the trade were \u20b9 19 per kg for fruits abstract although good buying could achieve some savings. The impact of exchange rates for imported sugar plus the minimum price fixed for sugarcane. caused the price of syrup to increase by 20%. The retail results for the batch were-<\/p>\n

        Fruit extract 428 kgs at \u20b9 18 per kg.
        \nGlucose syrup 742 kgs at \u20b9 12 per kg.
        \nPectin 125 kgs at \u20b9 32.8 per kg.
        \nCitric acid 1 kgs at \u20b9 95 per kg.
        \nLabour 20 hrs. at \u20b9 30 per hour.
        \nActual output was 1,164 kgs of raspberry jam.<\/p>\n

        You are required to:
        \n(i) Calculate the ingredients planning variances that are deemed uncontrollable.
        \n(ii) Calculate the Ingredients operating variances that are deemed controllable.
        \n(iii) Calculate the mixture and yield variances.
        \n(iv) Calculate the total variances for the batch. (May 2005, 11 marks)
        \nAnswer:
        \n(i) Ingredient Planning Variance:
        \nStandard quantity \u00d7 Std. Price –
        \nStd. quantity \u00d7 revised Ski. Price
        \n\"Standard<\/p>\n

        (ii) Operating variance:
        \n(A) Price variance:
        \nRevised Material Price -Actual Material Price \u00d7 Actual Quantity consumed
        \n\"Standard<\/p>\n

        (B) Usage variance:
        \n\"Standard<\/p>\n

        (C) Mix variance:
        \n\"Standard<\/p>\n

        (iii) Mixture & Yield variance:
        \n(Actual yield – Std. yield for actual output \u00d7 Std. cost per unit.)
        \n(1,164 – 1,257.12) \u00d7 \\(\\frac{19,486.8}{1,164}\\)
        \n= 1,158.9 (A)<\/p>\n

        (v) Labour Operating variance:
        \nStd. Labour cost – Actual Labour cost
        \n= 18 \u00d7 32.50 – 20 \u00d7 30
        \n= 585 – 600 = 15(A)<\/p>\n

        (iv) Total variance:
        \nPlanning variance + usage variance + price variance + labour operating variance
        \n= 2600 (A) + 1899.2 (A) + 583(F) + 15(A) = 3931.2 (A)<\/p>\n

        \"Standard<\/p>\n

        Question 26.
        \nThe following information is available from the cost records of Vatika & Co.
        \nFor the month of August, 2009:
        \nMaterial purchased 24,000 kg \u20b9 1,05,600
        \nMaterial consumed 22,800 kg
        \nActual wages paid for 5,940 hours \u20b9 29,700
        \nUnit produced 2160 units
        \nStandard rates and prices are:
        \nDirect material rate is \u20b9 4.00 per kg
        \nDirect labour rate is \u20b9 4.00 per hour
        \nStandard input is 10 kg. for one unit
        \nStandard requirement is 2.5 hours per unit
        \nCalculate all material and labour variances for the month of August, 2009. (Nov 2009, 8 marks)
        \nAnswer:
        \n(i) Material variances
        \n(i) Material Cost Variance
        \n= (Standard Quantity \u00d7 Standard Price) – (Actual Quantity \u00d7 Actual Price)
        \n= (2,160 \u00d7 4 \u00d7 10) – (22,800 \u00d7 4.40)
        \n= \u20b9 86,400 – \u20b9 1,00,320
        \n= 13,920(A)<\/p>\n

        (ii) Material Price Variance
        \n= Actual Quantity (Standard Price – Actual Price)
        \n= 2,800 Kg (4 – 4.40)
        \n= 9,120(A)<\/p>\n

        (iii) Material Usage Variance
        \nStandard Price (Standard Quantity – Actual Quantity)
        \n= 4 (21,600 – 22,800
        \n= 4,800 (A)<\/p>\n

        Note: unit basis for direct material has been taken as kg. hence, direct material rate is \u20b9 4 per kg.<\/p>\n

        Verification
        \nMCV = MPV + MUV
        \n13,920 (A) = 9,120 (Adverse) + 4,800 (A)<\/p>\n

        Labour Variances
        \n(i) Labour Cost Variance
        \n= (Standard Hour \u00d7 Standard Rate) – (Actual Hour \u00d7 Actual Rate)
        \n= (2.160 \u00d7 2.50 \u00d7 4) – (29,700)
        \n= 21,600 – 29,700 = 8,100(a)<\/p>\n

        (ii) Labour Rate Variance
        \n= Actual Hour (Standard Rato – Actual Rate)
        \n= 5,940 (4 – 5) = 5,940 (A)<\/p>\n

        (iii) Labour Efficiency Variance
        \n= Standard Rate (Standard Hour – Actual Hour)
        \n= 4(5,400 – 5,940) = 2,160 (A)<\/p>\n

        Verification:
        \nLCV = LRV + LEV
        \n8,100 (A) = 5,940 (A) + 2,160 (A)
        \nStandard Hour = 2,160 Units \u00d7 2.50 Hours = 5,400 Hrs.
        \n= 4(5,400 – 5,940) = 2,160 (A)<\/p>\n

        Verification:
        \nLCV = LRV + LEV
        \n8,100 (A) = 5,940 (A) + 2,160 (A)
        \nStandard Hour = 2.160 Units \u00d7 2.50 Hours = 5,400 Hrs.<\/p>\n

        Question 27.
        \nSB Constructions Limited has entered into a big contract at an agreed price of \u20b9 1,50,00,000 subject to an escalation clause for material and labour as spent out on the contract and corresponding actuals are as follows:
        \n\"Standard
        \n\"Standard<\/p>\n

        You are required to:
        \n(i) Give your analysis of admissible escalation daim and determine the final contract price payable. (May 2010, 4 marks)
        \n(ii) Prepare the contract account, if all the expenses other than material and labour related to the contract are \u20b9 13,45,000. (May 2010, 3 marks)
        \n(iii) Calculate the following variances and verify them:
        \n(a) Material cost variance
        \n(b) Material price variance
        \n(c) Material usage variance
        \n(d) Labour cost variance
        \n(e) Labour rate variance
        \n(f) Labour efficiency variance. (May 2010, 8 marks)
        \nAnswer:
        \n(i) Statement showing additional claim due to escalation clause.
        \n\"Standard
        \nStatement showing Final Contract Price
        \n\"Standard<\/p>\n

        (iii)
        \n\"Standard<\/p>\n

        Material Cost Variance (MCV) = (SQ \u00d7 SP) – (AQ \u00d7 AP)
        \n= \u20b9 99,20,000 – \u20b9 1,05,25,000
        \n= \u20b9 6,05,000(A)
        \nMaterial Price Variance (MPV) = AQ (SP – AP) or (AQ \u00d7 SP) – (AQ \u00d7 AP)
        \n= 1,03,40,000 – \u20b9 1,05,25,000
        \n= \u20b9 1,85,000 (A)
        \nMaterial Usage Variance (MUV) = (SQ \u00d7 SP) – (AQ \u00d7 SP)
        \n= \u20b9 99,20,000 – \u20b9 1,03,40,000
        \n= \u20b9 4,20,000(A)
        \nVerification = MCV = MPV + MUV
        \nOr \u20b9 6,05,000 (A) = \u20b9 1,85,000(A) + \u20b9 4,20,000(A)
        \nOr \u20b9 6,05,000 (A) = \u20b9 6,05,000(A)
        \n\"Standard
        \nLabour Cost Variance (LCV) = (SH \u00d7 SR) – (AH \u00d7 AR)
        \n= \u20b9 21,00,000 – 23,38,000
        \n= \u20b9 2,38,000(A)
        \nLabour Rate Variance (LRV) = (AH \u00d7 SR) – (AH \u00d7 AR)
        \n= \u20b9 19,80,000 – \u20b9 23,38,000
        \n= \u20b9 3,58,000(A)
        \nLabour Efficiency Variance (LEV) = (SH \u00d7 SP) – (AH \u00d7 SP)
        \n= 21,00,000 – 19,80,000
        \n= \u20b9 1,20,000(F)
        \nVerification – LCV = LRV + LEV
        \n2,38,000(A) = \u20b9 3,58,000(A) + \u20b9 1,20,000(F)
        \nOr \u20b9 2,38,000(A) = \u20b9 2,38,000(A)<\/p>\n

        Question 28.
        \nGama Ltd. has furnished the following standard cost data per unit of production:<\/p>\n

          \n
        • Material 10kg @ \u20b9 10 per kg.<\/li>\n
        • Labour 6 hours @ \u20b9 5.50 per hour.<\/li>\n
        • Variable overhead 6 hours @ \u20b9 10 per hour.<\/li>\n
        • Fixed overhead \u20b9 4,50,000 per month (Based on a normal volume of 30,000 labour hours). The actual cost data for the month of August 2011 are as follows:<\/li>\n
        • Material used 50,000 kg at a cost of \u20b9 5,25,000.<\/li>\n
        • Labour paid \u20b9 1,55,000 for 31,000 hours worked.<\/li>\n
        • Variable overheads \u20b9 2,93,000.<\/li>\n
        • Fixed overheads \u20b9 4,70,000.<\/li>\n
        • Actual production 4,800 units.<\/li>\n<\/ul>\n

          Calculate:
          \n(i) Material cost variance
          \n(ii) Labour cost variance.
          \n(iii) Fixed overhead cost variance
          \n(iv) Variable overhead cost variance (Nov 2011, 8 marks)
          \nAnswer:
          \nBudgeted Production 30,000\/5,000 units
          \nBudgeted Fixed Overhead Rate = 4,50,000\/5,000
          \n= \u20b9 90 per unit<\/p>\n

          1. Material Cost Variance = Total Standard Cost for Actual Output – Total Actual Cost
          \n= 4,800 \u00d7 10 \u00d7 10 \u00d7 5,25,000
          \n= 4,80,000 – 5,25,000
          \n= 45,000(A)<\/p>\n

          2. Labour Cost Variance = Total Standard Cost of labour for Actual Output – Total Actual Cost of labour
          \n= 4,800 \u00d7 6.0 \u00d7 5.50 – 1,55,000
          \n= 1,58,400 – 1,55,000
          \n= 3,400 (F)<\/p>\n

          3. Fixed OH Cost Variance = Recovered Fixed overhead – Actual Fixed overhead
          \n= 90 \u00d7 4,800 – 4,70,000
          \n= 38,000 (A)<\/p>\n

          4. Variable OH Cost Variance = Recovered Variable overheads – Actual Variables overheads
          \n= 4,800 \u00d7 6 \u00d7 10
          \n= 2,88,000 – 2,93,000
          \n= 5,000(A)<\/p>\n

          Question 29.
          \nSP Limited produces a product \u2018Tempex\u2019 which is sold in a 10 Kg. packet. The standard cost card per packet of \u2018Tempex\u2019 are as follows:
          \n\"Standard
          \nBudgeted output for the third quarter of a year was 10,000 Kg. Actual output is 9,000 Kg.<\/p>\n

          Actual cost for this quarter are as follows:<\/p>\n

          Direct Materials 8,900 Kg @ \u20b9 46 per Kg. : \u20b9 4,09,400
          \nDirect Labour 7,000 hours @ \u20b9 52 per hour : \u20b9 3,64,0001
          \nVariable Overhead incurred : 72,500
          \nFixed Overhead incurred : \u20b9 1,92,000<\/p>\n

          You are required to calculate:<\/p>\n

            \n
          1. Material Usage Variance<\/li>\n
          2. Material Price Variance<\/li>\n
          3. Material Cost Variance<\/li>\n
          4. Labour Efficiency Variance<\/li>\n
          5. Labour Rate Variance<\/li>\n
          6. Labour Cost Variance<\/li>\n
          7. Variable Overhead Cost Variance<\/li>\n
          8. Fixed Overhead Cost Variance (Nov 2013, 8 marks)<\/li>\n<\/ol>\n

            Answer:
            \nBudgeted Production 30,000\/6 = 5,000 units
            \nBudgeted F\u00ecxed Overhead Rato = 4,50,000\/5,000
            \n= \u20b9 90 per unit<\/p>\n

            1. M\u00e1terial Cost Variance = Total Standard Cost for Actual Output – Total Actual Cost
            \n= 4,800 \u00d7 10 \u00d7 10 – 5,25,000
            \n= 4,80,000 – 5,25,000
            \n= 45,000 (A)<\/p>\n

            2. Labour Cost Variance = Total Standard Cost of labour for Actual Output – Total Actual Cost of labour
            \n= 4,800 \u00d7 6.0 \u00d7 5.50 – 1,55,000
            \n= 1,58,400 – 1,55,000
            \n= 3,400(F)<\/p>\n

            3. Fixed OH Cost Variance = Recovered Fixed overhead – Actual Fixed overhead
            \n= 90 \u00d7 4,800 – 4,70,000
            \n= 38,000(A)<\/p>\n

            4. Variable OH Cost Variance Recovered Variable overheads – Actual Variables overheads
            \n= 4,800 \u00d7 6 \u00d7 10
            \n= 2,88,000 – 2,93,000
            \n= 5,000(A)<\/p>\n

            Question 30.
            \nSP Limited produces a product \u2018Tempex\u2019 which is sold in a 10 Kg. packet. The standard cast card per packet of \u2018Tempex\u2019 are as follows:
            \n\"Standard
            \nBudgeted output for the third quarter of a year was 10,000 Kg. Actual output is 9,000 Kg.
            \nActual cost for this quarter are as follows:
            \nDirect Materials 8,900 Kg @ \u20b9 46 per Kg. : \u20b9 4,09,400
            \nDirect Labour 7,000 hours @ \u20b9 52 per hour : \u20b9 3,64,00\u0152
            \nVariable Overhead incurred : \u20b9 72,500
            \nFixed Overhead incurred : \u20b9 1,92,000<\/p>\n

            You are required to calculate:<\/p>\n

            (i) Material Usage Variance
            \n(ii) Material Price Varlarce
            \n(iii) Material Cost Variance
            \n(iv) Labour Efficiency Variance
            \n(v) Labour Rato Variance
            \n(vi) Labour Cost Variance
            \n(vii) Variable Overhead Cost Variance
            \n(viii) Fixed Overhead Cost Variance (Nov 2013, 8 marks)
            \nAnswer:
            \n(i) Material Usage Variance
            \n= Standard price (Standard quantity – Actual quantity)
            \n= \u20b9 45 (9,000 – 8,900)
            \n= \u20b9 4,500(F)<\/p>\n

            (ii) Material Price Variance
            \n= Actual quantity (Standard price – Actual price)
            \n= 8,900(45-46)
            \n= 8,900 (A)<\/p>\n

            (iii) Material Cost Variance
            \n= Standard cost – Actual cost
            \n= (9,000 \u00d7 45) – (8,900 \u00d7 46)
            \n= 4,05,000 – 4,09,400
            \n= 4,400 (A)<\/p>\n

            (iv) Labour Efficiency Variance
            \n= Standard rate (standard hours for actual output – actual hours)
            \n50 (9,000 \u00d7 \\(\\frac{8}{10}\\) – 7,000)
            \n= 10,000 (F)<\/p>\n

            (v) Labour Rate Variance
            \n= Actual time (std. rate – actual rate)
            \n= 7,000 (50 – 52)
            \n= 14,000 (A)<\/p>\n

            (vi) Labour Cost Variance
            \n= Labour efficiency variance + Labour rate variance
            \n= 10,000 + (-14,000)
            \n= 4,000 (A)<\/p>\n

            (vii) Variable Overhead Cost Variance
            \n= (Standard hours \u00d7 Standard rate) – Absorbed variable overhead.
            \n= (9,000 \u00d7 \\(\\frac{8}{10}\\) \u00d7 10) – 72,500 = 500(A)<\/p>\n

            (viii) Fixed Overhead Cost Variance
            \n= (actual output \u00d7 std. hours) – Absorbed fixed OH
            \n= (9.000 \u00d7 \\(\\frac{200}{10}\\)) – 1,92,000 = 12,000 (A)<\/p>\n

            \"Standard<\/p>\n

            Question 31.
            \nX Associates undertake to prepare income tax returns for individuals for a fee. They use the weighted average method and actual costs for the financial reporting purposes. However, for internal reporting, they use a standard cost system. The standards, based on equivalent performance, have been established as follows:
            \nLabour per return 5 hrs @ \u20b9 40 per hour
            \nOverhead per return 5 hrs @ \u20b9 20 per hour
            \nFor March 2015 performance, budgeted overhead is \u20b9 98,000 for standard labour hours allowed. The following additional information pertains to the month of March 2015:
            \n\"Standard<\/p>\n

            You are required to compute:
            \n(a) For each element, equivalent units of performance and the actual cost per equivalent unit.
            \n(b) Actual cost of return-in-process on March 31.
            \n(c) The standard cost per return.
            \n(d) The labour rate and labour efficiency variance as well as overhead volume and overhead expenditure variance. (May 2016, 8 marks)
            \nAnswer:
            \n(a) Statement Showing Cost Elements Equivalent. Units of performance and the Actual Cost per Equivalent Unit:
            \n\"Standard<\/p>\n

            (b) Actual cost of returns in process on March 31:
            \n\"Standard<\/p>\n

            (c) Standard Cost Per Return
            \n\"Standard
            \nBudgeted volume for March = 98,000 \/ 1.000 = 980
            \nReturns
            \nActual labour rate = \u20b9 1,78,000\/4,000 = \u20b9 44.50<\/p>\n

            (d) Computation of Variances:
            \n\"Standard<\/p>\n

            Variance Analysis:
            \nLabour Rate Variance
            \n= Actual Time \u00d7 (Standard Rate – Actual Rate)
            \n= Standard Rate \u00d7 Actual Time – Actual Rate \u00d7 Actual Time
            \n= \u20b9 40 \u00d7 4,000 hrs. – \u20b9 1,78,000 = \u20b9 18,000 (A)
            \nLabour Efficiency Variance = Standard Rate \u00d7 (Standard Time – Actual Time)
            \n= Standard Rate \u00d7 Standard Time – Standard Rate \u00d7 Actual Time
            \n= \u20b9 40 \u00d7 (950 units \u00d7 5 hrs.) – \u20b9 40 \u00d7 4,000 hrs.
            \n= 1,90,000 – 1,60,000 = \u20b9 30,000 (F)
            \nOverhead Expenditure or Budgeted Variance
            \n= Budgeted Overhead – Actual Overhead
            \n= \u20b9 98,000 – \u20b9 90,000
            \n= \u20b9 8,000 (F)
            \nOverhead Volume Variance
            \n= Recovered\/ Absorbed Overhead – Budgeted Overhead
            \n= 950 Units \u00d7 5 hrs. \u00d7 \u20b9 20 – \u20b9 98,000 = \u20b9 3,000 (A)<\/p>\n

            Question 32.
            \nThe following information is available from the cost records of a Company for the month of July. 2016:<\/p>\n

              \n
            1. Material purchased 22000 pieces \u20b9 90,000<\/li>\n
            2. Material consumed 21000 pieces<\/li>\n
            3. Actual wages paid for 5150 hours \u20b9 25,750<\/li>\n
            4. Fixed Factory overhead incurred \u20b9 46,000<\/li>\n
            5. Fixed Factory overhead budgeted \u20b9 42,000<\/li>\n
            6. Units produced 1900*<\/li>\n
            7. Standard rates and prices are:<\/li>\n<\/ol>\n

              Direct material \u20b9 4.50 per piece
              \nStandard input 10 pieces per unit
              \nDirect labour rate \u20b9 6 per hour
              \nStandard requirement 2.5 hours per unit
              \nOverheads \u20b9 8 per labour hour<\/p>\n

              You are required to calculate the following variances:<\/p>\n

                \n
              1. Material price variance<\/li>\n
              2. Material usage variance<\/li>\n
              3. Labour rate variance<\/li>\n
              4. Labour efficiency variance<\/li>\n
              5. Fixed overhead expenditure variance<\/li>\n
              6. Fixed overhead efficiency variance<\/li>\n
              7. Fixed overhead capacity variance. (Nov 2016, 8 marks)<\/li>\n<\/ol>\n

                Answer:
                \nCalculation of:<\/p>\n

                1. Material Price Variance:
                \nMPV = (Standard Price – Actual Price) \u00d7 Actual Quantity = (4.50 – 4.09) \u00d7 21,000 = 8,610 (Favourable)<\/p>\n

                2. Material Usage Variance:
                \nMUV = (Standard Quantity – Actual Quantity) \u00d7 Standard Price = (19,000 – 21,000) \u00d7 4.50 = 9,000(Adverse)<\/p>\n

                3. Labour Rate Variance:
                \nLRV = (Standard rate – Actual rate) x Actual hours.
                \n= (6 – 5) \u00d7 5,150 = 5,150 (Favourable)<\/p>\n

                4. Labour Efficiency Variance:
                \nLEV = (Standard hours – Actual hours) \u00d7 Standard rate
                \n= (4,750 -5,150) \u00d7 6 = 2,400 (Adverse)<\/p>\n

                5. Fixed overhead expenditure variance:
                \nFOH exp. variance = Budgeted exp. – Actual exp.
                \n= \u20b9 42,00046,000
                \n= \u20b9 4,000 (Adverse)<\/p>\n

                6. Fixed overhead efficiency variance:
                \nFOH efficiency variance = SR \u00d7 (SH – AH)
                \n= 8 \u00d7 (4,750-5,150)
                \n= 3,200 (Adverse)<\/p>\n

                7. Fixed overhead capacity variance:
                \nFOH capacity variance = SR \u00d7 (AH – Budgeted Hour)
                \n= 8 \u00d7 (5,150 – 5,250)
                \n= 800 (Adverse)
                \nBudgeted Hour = \\(\\frac{42,000}{8}\\) = 5,250<\/p>\n

                Question 33.
                \nABC Ltd. had prepared the following estimation for the month of April:
                \n\"Standard
                \nNormal loss was expected to be 10% of total input materials and an idle labour time of 5% of expected labour hours was also estimated.<\/p>\n

                At the end of the month the following information has been collected from the cost accounting department:
                \nThe company has produced 1,480 kg. finished product by using the followings:
                \n\"Standard
                \nYou are required to CALCULATE:
                \n(a) Material Cost Variance;
                \n(b) Material Price Variance;
                \n(C) Material Mix Variance;
                \n(d) Material Yield Variance;
                \n(e) Labour Cost Variance;
                \n(f) Labour Efficiency Variance and
                \n(g) Labour Yield Variance.
                \nAnswer:
                \nMaterial Variances:
                \n\"Standard
                \nWN-1: Standard Quantity (SQ):
                \nMaterial – A – (\\(\\frac{800 \\mathrm{~kg} .}{0.9 \\times 1,400 \\mathrm{~kg}}\\) \u00d7 1,480 kg) = 939.68 or 940 kg.
                \nMaterial – B – (\\(\\frac{600 \\mathrm{~kg} .}{0.9 \\times 1,400 \\mathrm{~kg}}\\) \u00d7 1,480 kg) = 704.76 or 705 kg.<\/p>\n

                WN- 2: Revised Standard Quantity (RSQ):
                \nMaterial A- (\\(\\frac{800 \\mathrm{~kg} .}{0.9 \\times 1,400 \\mathrm{~kg}}\\) \u00d7 1,550 kg.] = 885.71 or 886 kg.
                \nMaterial B – (\\(\\frac{600 \\mathrm{~kg}}{0.9 \\times 1,400 \\mathrm{~kg}}\\) \u00d7 1,550 kg.] = 664.28 or 664 kg.<\/p>\n

                (a) Material Cost Variance (A + B) = {(SQ \u00d7 SP) – (AQ \u00d7 AP)}
                \n= {63,450 – 59,825} = 3,625 (F)
                \n(b) Material Price Variance (A + B) = {(AQ \u00d7 SP) – (AQ \u00d7 AP)
                \n= {60,000 – 59,825} = 175(F)
                \n(c) Material Mix Variance (A + B) = {(RSQ \u00d7 SP) – (AQ \u00d7 SP)}
                \n= {59,790 – 60,000} =210 (A)
                \n(d) Material Yield Variance (A + B) = {(SQ \u00d7 SP) – (RSQ \u00d7 SP)}
                \n= {63,450 – 59,790} = 3,660 (F)
                \nLabour Variances:
                \n\"Standard<\/p>\n

                WN- 3: Standard Hours (SH):
                \nSkilled labour = (\\(\\frac{0.95 \\times 1,000 \\mathrm{hrs}}{0.90 \\times 1,400 \\mathrm{~kg}}\\) \u00d7 1,480 kg.) = 1,115.87 or 1,116 hrs.
                \nUnskilled labour = ((\\(\\frac{0.95 \\times 800 \\mathrm{hrs}}{0.90 \\times 1,400 \\mathrm{~kg}}\\)) \u00d7 1,480 kg.) = 892,69 or 893 hrs.<\/p>\n

                WN- 4: Revised Standard Hours (RSH):
                \nSkilled labour = (\\(\\frac{1,000 \\mathrm{hr}}{1,800 \\mathrm{hr}}\\) \u00d7 2,060 hr.s.) = 1,144.44 or 1,144 hrs.
                \nUnskilled labour = (\\(\\frac{800 \\mathrm{hr}}{1,800 \\mathrm{hr}}\\) \u00d7 2,060 hr.s.) = 915.56 or 916 hrs.<\/p>\n

                (e) Labour Cost Variance
                \n(Skilled +Unskilled) = {(SH \u00d7 SR) – (AH \u00d7 AR)}
                \n= {61,496 – 62,380} = 884 (A)
                \n(f) Labour Efficiency Variance
                \n(Skilled+Unskilled) = {(SH \u00d7 SR) – (AH \u00d7 SR)}
                \n= {61,496 – 63,920} = 2,424 (A)
                \n(g) Labour Yield Variance
                \n(Skilled + Unskilled) = {(SH \u00d7 SR) – (RSH \u00d7 SR)}<\/p>\n

                Miscellaneous<\/p>\n

                Question 34.
                \nDescribe three distinct group of variances that arise in standard costing. (May 2000, 6 marks)
                \nAnswer:
                \nThe three distinct groups of variances that arise in standard costing are :<\/p>\n

                  \n
                1. Variances of efficiency : These are the variances, which arise due to efficiency or inefficiency in use of material, labour etc.<\/li>\n
                2. Variances of prices and rates : These are the variances, which arise due to changes in procurement, price and standard price.<\/li>\n
                3. Variances due to volume : These represent, the effect of difference between actual activity and standard level of activity.<\/li>\n<\/ol>\n

                  The above can be summarised as follows:-
                  \n\"Standard<\/p>\n

                  Question 35.
                  \nState the features of Partial Plan of Standards Cost Accounting procedure. (May 2001, 4 marks)
                  \nAnswer:
                  \nFeatures of Partial Plan of Standard Cost Accounting procedure : Standard cost operations can be recorded in the books of account by using partial plan.<\/p>\n

                  Features of partial plan are as follows :-<\/p>\n

                    \n
                  1. Partial plan system uses current standards in which the inventory will be valued at current standard cost figure.<\/li>\n
                  2. The analysis of variance is done after the end of the month.<\/li>\n
                  3. The closing balance of WIP is also shown at standard cost. The balance – after making the credit entries represent the variance from standard for the month.<\/li>\n
                  4. Under this method, WIP account is charged at the actual cost of production for the month and is credited with the standard cost of the month\u2019s production of finished product.<\/li>\n<\/ol>\n

                    \"Standard<\/p>\n

                    Question 36.
                    \n“Standard costing system is not compatible with Activity Based Costing System.” Do you agree with this statement? Explain your answer. (May 2002, 3 marks)
                    \nAnswer:
                    \nIt is not correct to say that standard Costing system is not compatible with Activity Based Costing System. Standard costing system is a tool for cost control. In this, standards are established for each cost element. Variances between standard cost and actual costs are reported periodically to managers, who use the information of remedial measures or for revision of standards.<\/p>\n

                    Under \u2018Activity Based Costing System\u2019 costs are collected around activity pools and are assigned to products and services using appropriate cost drivers. Standards can be established for costs for carrying out each type of activity.<\/p>\n

                    Question 37.
                    \nHow the opportunity cost for inefficient use of scarce resources be presented in variance reports under a standard costing system? (May 2002, 4 marks)
                    \nAnswer:
                    \nOpportunity cost arises from failure to use scarce resources efficiently, such as :<\/p>\n

                    1. Inefficient capacity utilisation results in loss of production and consequently loss of contribution.<\/p>\n

                    2. Inefficient use of scarce material results in lower production and loss of contribution. So, it is appropriate to include contribution loss in reporting material usage variance or labour efficiency variance, in case the material is scarce or labour hours is scarce. As a general rule, loss of contribution should be included in the variance report and should be assigned to the manager, whose below standard performance has caused the loss.<\/p>\n

                    Question 38.
                    \nUnder the single plan, record the journal entries giving appropriate narration, with indication of amounts of debits or credits alongside the entries, for the following transactions using the respective control A\/c.
                    \n(i) Material price variance (on purchase of materials)
                    \n(ii) Material usage variance (on consumption)
                    \n(iii) Labour rate variance. (Nov 2006, 6 marks)
                    \nAnswer:
                    \nUnder the single plan, Journal entries are :
                    \n(i) Material price variance (on purchase of materials)
                    \n\"Standard<\/p>\n

                    (ii) Material usages variance (on consumption)
                    \n\"Standard
                    \n(Being recording of usage variance at Standard cost of over\/under utilised quantity).<\/p>\n

                    (iii) Labour Rate Variance :-
                    \n\"Standard
                    \n(Being entry to record wages at standard rate)<\/p>\n","protected":false},"excerpt":{"rendered":"

                    Standard Costing \u2013 CA Inter Costing Question Bank is designed strictly as per the latest syllabus and exam pattern. Standard Costing – CA Inter Costing Question Bank Question 1. A company produces a finished product by using three basic raw materials. The following standards have been set-up for raw materials: The standard loss in process …<\/p>\n

                    Standard Costing – CA Inter Costing Question Bank<\/span> Read More »<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[167],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/23226"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=23226"}],"version-history":[{"count":5,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/23226\/revisions"}],"predecessor-version":[{"id":23375,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/23226\/revisions\/23375"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=23226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=23226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=23226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}