### Standard qty at std mix

### Actual qty at actual mix

### Actual qty at std mix

Material Price Variance:

Material Rate Difference

Std Actual

Gum Base 0.25 0.24 0.01 Fav

Corn Syrup 0.40 0.42 0.02 UF

Sugar 0.10 0.11 0.01 UF

Material Mix Variance:

MMV = (Difference b/w Actual qty at actual mix and actual qty at std mix) x std rate

Material Actual Qty Std. Mixing Actual Qty Variance

at actual mix Ratio at Std. Mix

Gum Base 157,000 0.6667 154,000 3,000

Corn Syrup 38,000 0.1667 38,500 500

Sugar 36,000 0.1667 38,500 2,500

231,000 1 231,000

Working no.1:
Calculation of Standard Mixing Ratio:

Material Qty Std.

Mix
Gum Base 800 0.6667
 Corn Syrup 200 0.1667

Sugar 200 0.1667

1,200 1

Working no.2:
Calculation of actual quantity at actual mix:

Material Opening Purchase Closing Actual Qty

Stock Stock used
Gum Base 10,000 162,000 15,000 157,000

Corn Syrup 12,000 30,000 4,000 38,000

Sugar 15,000 32,000 11,000 36,000

Actual Quantity used at 231,000
Actual mixing ratio

Material Yeild Variance:

Actual material input 231,000

Expected yeild 0.8333

Output ?

Expected yeild = Output / input

0.8333 = Output / 231,000

Output = 192,500 Std, Output

200,000 Actual output

7,500 Yeild - Fav

0.30 Std. Material output rate

2,250 Material yeild variance (Fav)

 Actual MPV
Qty

162,000 ### Fav

30,000 ### UF

32,000 ### UF
MPV ### Fav

std mix) x std rate

Std. Material
Rate Mix Variance

UF 0.25 750 UF

Fav 0.40 200 Fav

Fav 0.10 250 Fav

300 UF
Actual Qty
 Fatory over head Variance
2 - Variance method

1 Controllable Variance
a) Actual amount of factory overhead
Fixed FOH
Variable FOH 100,000

b) Budget allowance based in standard hours allowed

Fixed budgeted overhead
Variable budgeted OH
(Standard hours allowed x
Variable per unit rate) - 120,000
CONTROLLABLE VARIANCE 20,000

2 Volume Variance
a) Budget allowance based in standard hours allowed 120,000

b) Overhead charged to production

Standard hours allowed x
Total Standard Factory overhead rate 150,000
VOLUME VARIANCE 30,000

3 - Variance method

1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH
Variable FOH -

b) Budget allowance based in actual hours

Fixed budgeted overhead
Variable budgeted OH
(Actual hours x
Variable per unit rate) - -
Spending Variance -

2 Idle Capacity Variance

a) Budget allowance based in Actual hours -

b) Overhead charged to production

Actual hours x
Total Standard Factory overhead rate -
Idle Capacity Variance -

3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours allowed x
Total Standard Factory overhead rate -

b) Overhead charged to production (Based on Standard hours)

Standard hours allowed x
Total Standard Factory overhead rate -
Efficiency Variance
Sol of Ex - 1
Material Quantity Variance
Formula: Difference between Standard and Actual Quantity x Standard Rate

Standard quantity allowed for production

(7,200 Chairs x 12 m per chair) 86,400 meters

Actual quantity used in production 87,300 meters

Difference (900) U
Standard Rate 0.80

Material quantity variance (720) U

Material Price Variance

Formula: Difference between Standard and Actual rate x Actual quantity purchas

Standard rate for purchases 0.80

Actual rate on purchases 0.78

Difference 0.02 F
Actual Quantity purchased 100,000

Material price variance 2,000 F

tity x Standard Rate

x Actual quantity purchased

Solution of Ex-2

Material Price Variance (At the time of purchases)

Difference between Standard and Actual rate x Actual quantity purchased

Standard rate for purchases 3.65

Actual rate on purchases 3.60

Difference 0.05 F
Actual Quantity purchase 2,000

Material price variance 100 F

Material Price Variance (at the time of issue)

Difference between Standard and Actual rate x Actual quantity ISSUE

Standard rate for purchases 3.65

Actual rate on purchases 3.60

Difference 0.05 F
Actual Quantity issued 1,775

Material price variance 89 F

l quantity purchased

l quantity ISSUE
Solution of Ex -3

Labour hour/ efficency Variance

Difference between Standard and Actual hours x Standard Rate

Standard hours allowed for production

(2,000 units x 0.80 hours) 1,600
Actual hours used in production 1,580

Difference 20 F
Standard Rate 6.75

Labour hour/ efficency Variance 135 F

Labour Price Variance

Difference between Standard and Actual rate x Actual hours used

Standard rate for payment of labour 6.75

Actual rate paid to labour 6.90

Difference (0.15) u
Actual hours used 1,580

Labour Price Variance (237) u

ndard Rate

l hours used
Solution of Ex -4

Fatory over head Variance

2 - Variance method

1 Controllable Variance
a) Actual amount of factory overhead
1 Fixed FOH 4,500
2 Variable FOH 6,500

b) Budgeted Factory overhead:

1 Fixed budgeted overhead 4,500
2 Variable budgeted OH
(Standard hours allowed x 4,500
Variable per unit rate) 1.50 6,750
CONTROLLABLE VARIANCE

2 Volume Variance
a) Budgeted Factory overhead:
1 Fixed FOH 4,500
2 Variable FOH 6,750

b) Standard Fac tory overhead

1 Fixed FOH (4,500 hours x 0.90) 4,050
2 Variable FOH (4,500 hours x 1.50) 6,750

VOLUME VARIANCE

3 - Variance method

1 Spending Variance
 a) Actual amount of factory overhead
1 Fixed FOH
2 Variable FOH

b) Budgeted Factory overhead

1 Fixed budgeted overhead 4,500
2 Variable budgeted OH
(Actual hours worked x 4,400
Variable per unit rate) 1.50 6,600
Spending Variance

2 Idle Capacity Variance

a) Budget allowance based in Actual hours allowed

b) Overhead charged to production (Based on Actual hours)

Actual hours allowed x 4,400
Total Standard Factory overhead rate 2.40
Idle Capacity Variance

3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours allowed x
Total Standard Factory overhead rate

b) Overhead charged to production (Based on Standard hours)

Standard hours allowed x
Total Standard Factory overhead rate
Efficiency Variance

4 - Variance method

1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH
Variable FOH
 b) Budget allowance based on actual hours
Fixed budgeted overhead
Variable budgeted OH
(Actual hours x 4,400
Variable per unit rate) 1.50
Spending Variance

2 Variable Efficiency Variance:

Budget allowance based on actual hours

Budget allowance based on Standard hours allowed

Variable Efficiency Variance:

Proof OR
Difference between actual hours and Standard hours x variable FOH rate

(4500 hours std. - 4400 hours actual) x 1.50

(100 hours Fav x 1.50)

Rs. 150 Fav.

3 Fixed Efficiency Variance:

Actual hours x Fixed FOH rate (4,400 hours x 0.90)

Standard hours allowed x Fixed FOH rate (4,500 hours x 0.90)

Fixed Efficiency Variance:

Proof OR
Difference between actual hours and Standard hours x Fixed FOH rate
 (4500 hours std. - 4400 hours actual) x 0.90

(100 hours Fav x 0.90)

Rs. 90 Fav.

4 Idle Capacity Variance

Normal Capacity hours x Fixed FOH rate (5,000 hours x 0.90)

Actual hours worked x Fixed FOH rate (4,400 hours x 0.90)

Idle Capacity Variance

Proof OR
Difference between actual hours and Normal capacity hours x Fixed FOH rate

(5000 hours std. - 4400 hours actual) x 0.90

(600 hours Unfav x 0.90)

Rs. 540 Unfav.

ance

11,000

11,250
(250) F

11,250

10,800

(450) U
 4,500
6,500 11,000

11,100
(100) F

11,100

10,560
(540) U

10,560

dard hours)
4,500
2.40 10,800
(240) F

11,000
 4,500

6,600 11,100
100 Fav

11,100

(11,100) Fav

s x variable FOH rate

ours x 0.90) 3,960

(4,500 hours x 0.90) 4,050

90 Fav

s x Fixed FOH rate

 4,500

3,960

540 Unfav

ity hours x Fixed FOH rate

Quantity Schedule:

Units in process (at start) 80 units (all material, 50% conversion)

Units put in to process 7,850 units
Total 7,930 units

Units completed &

tansferred out 7,830 units
Units in process (at end) 100 units (all material, 50% conversion)
7,930 units

Equivalent Production Unit

Material Conversion
Units completed & transferred out 7,830 7,830
Less: Opening stock (80) (80)

Unit started & completed 7,750 7,750

Add: Opening stock - work this period - 40
Add: Closing stock - work this period 100 50
EPU 7,850 7,840

Material Quantity Variance

Formula:Difference between Standard and Actual Quantity x Standard Rate

Standard quantity allowed for production

(7,850 units x 24 kgs per unit) 188,400

Actual quantity used in production 192,410

Difference 4,010 U
Standard Rate 3

Material quantity variance 12,030 U

Material Price Variance

Formula:Difference between Standard and Actual rate x Actual quantity used

 Standard rate for purchases 3
Actual rate on purchases 3.04

Difference 0.04 U
Actual Quantity 192,410

Material price variance 7,696.40 U

Labour hour/ efficency Variance

Formula:Difference between Standard and Actual hours x Standard Rate

Standard hours allowed for production

(7,840 units x 6 hours per unit consumption) 47,040

Actual hours used in production 46,830

Difference 210 F
Standard Rate 6.50

Labour hour/ efficency Variance 1,365 F

Labour Price Variance

Formula:Difference between Standard and Actual rate x Actual hours used

Standard rate for payment of labour 6.50

Actual rate paid to labour 6.60

Difference 0.10 U
Actual hours used 46,830

Labour Price Variance 4,683 U

Fatory over head Variance

2 - Variance method

1 Controllable Variance
 a) Actual amount of factory overhead
Fixed FOH 11,250
Variable FOH 25,090

b) Budget allowance based in standard hours allowed

Fixed budgeted overhead 11,250
Variable budgeted OH
(Standard hours allowed x 47,040
Variable per unit rate) 0.50 23,520
CONTROLLABLE VARIANCE

Note: Standard hours allowed = 7,840 units x 6 =47,040 hours

Standard rate = Rs. 22,500 / 45,000 hours = 0.50

2 Volume Variance
a) Budget allowance based in standard hours allowed

b) Overhead charged to production

Standard hours allowed x 47,040
Total Standard Factory overhead rate 0.75
VOLUME VARIANCE

Note: Total FOH rate = Rs. 33,750 / 45,000 hours = 0.75

erial, 50% conversion)

erial, 50% conversion)

antity used
36,340

34,770
1,570 U

34,770

35,280
510 F
Required no.1: Standard quantity allowed of material:

Actual production 4,000 units

Per unit standard consumption of material 6 lbs

Standard quantity allowed 24,000 lbs

Required no.2: Actual quantity used of material:

Standard quantity allowed 24,000 lbs

add: unfavourable quantity variance 1,000 lbs

Actual quantity used 25,000 lbs

Required no. 3: Standard hours allowed:

Actual production 4,000 units

Per unit standard consumption of labour 1 hour

Standard hours allowed 4,000 hours

Required no. 4: Actual hours worked:

Standard hours allowed 4,000 hours

Less: Favourable labour efficiency variance (200) hours

Actual hours allowed 3,800 hours

Note: Favourable hours = Rs. 800 efficiency variance / Rs. 4 per hour
= 200 hours

Required no. 5: Actual direct labour rate:

Standard direct labor rate 4

Add: unfavourable labor rate variance 0.20

Actual direct labour rate 4.20

Note: Unfavourable rate = Rs. 760 labor rate variance / 3,800 actual hours worked
 = 0.20

Required no. 6: Actual Factory overhead

Standard factory overhead (4,000 units actual production x Rs. 3

per unit FOH rate)

Add: unfavourable FOH variance

Actual Factory overhead

ual hours worked
12,000

500

12,500
 Aplha Beeta

Actual Sales 120 million @ Rs. 1.10 40 million @ Rs. 2.20

Actual COGS 120 million @ Rs. 0.90 40 million @ Rs. 1.80

Budgeted Sales 110 million @ Rs. 1.35 70 million @ Rs. 2.70

Budgeted COGS 110 million @ Rs. 1.10 70 million @ Rs. 2.20

Required (1):
Calculate a) Sales Price variance b) Sales volume variance
c) Cost price variance d) Cost volume variance

Required (2)
Sales mix and the final sales volume variance

Solution
Sales Price Variance:
(Actual quantity x Actual mix x Actual rate) - (Actual quantity x Actual mix x Std.

[(Actual qty x actual rate) + (actual qty x actual rate)] - [(Actual qty x std rate) + (

[(6,000 x 10) + (2,000 x 20)] - [(6,000 x 12.5) + (2,000 x 25)]

Rs. 25,000 (Un-Favourable)

Sales Volume variance:

(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std

[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (B

[(6,000 x 12.5) + (2,000 x 25)] - [(5,000 x 12.5) + (3,500 x 25)]

Rs. 25,000 (Un-Favourable)

Req no. 3: Cost Price variance

[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x

Cost Volume variance:

(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std

[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x

SALES MIX VARIANCE

Actual quantity x actual mix x standard rate

Less: Actual quantity x actual mix x standard COGS rat

Less: Actual sales (both) x budgeted average gross profit

(6,000 + 2000) x 3.5294

SALES MIX VARIANCE

 Total

Rs. 220 million

Rs. 180 million

Rs. 337.50 million

Rs. 275.00 million

(Actual quantity x Actual mix x Std. rate)

al rate)] - [(Actual qty x std rate) + (actual qty x std rate)]

(2,000 x 25)]

udgeted quantity x actual mix x std rate)

te)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]

+ (3,500 x 25)]
 x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]

udgeted quantity x actual mix x std rate)

std. COGSrate)] - [(Budgeted Qty x std COGS rate) + (Budgeted qty x std COGS rate)]

125,000

(100,000)

25,000
gross profit
(28,235.20)

(3,235.20) Unfav.
 Aplha Beeta Total

Actual Sales 120 million @ Rs. 1.10 40 million @ Rs. 2.20 Rs. 220 million
Actual COGS 120 million @ Rs. 0.90 40 million @ Rs. 1.80 Rs. 180 million

Budgeted Sales 110 million @ Rs. 1.35 70 million @ Rs. 2.70 Rs. 337.50 million
Budgeted COGS 110 million @ Rs. 1.10 70 million @ Rs. 2.20 Rs. 275.00 million

Required (1):
Calculate a) Sales Price variance b) Sales volume variance
c) Cost price variance d) Cost volume variance

Required (2)
Sales mix and the final sales volume variance

Solution
Sales Price Variance:
(Actual quantity x Actual mix x Actual rate) - (Actual quantity x Actual mix x Std. rate)

[(Actual qty x actual rate) + (actual qty x actual rate)] - [(Actual qty x std rate) + (actual qty x std

[(120 m x 1.10) + (40 m x 2.20)] - [(120 m x 1.35) + (40 m x 2.70)]

Rs. 220 - Rs. 270

Rs. 50 million (unfavourable)

Sales Volume variance:

(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)

[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x s

[(120 m x 1.35) + (40 m x 2.70)] - [(110 m x 1.35) + (70 m x 2.70)]

[162 + 108] - [ 148.50 + 189]

270 - 337.50

67.50 (Unfavourable)

Req no. 3: Cost Price variance

[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate)

[(120 m x 0.90) + (40 m x 1.80)] - [(120 m x 1.10) + (40 m x 2.20)]

[108 + 72] - [ 132 + 88]

180 - 220

40 Million (Favourable)

Cost Volume variance:

(Actual quantity x Actual mix x Std. rate) - (Budgeted quantity x actual mix x std rate)

[(Actual Qty x std COGsrate) + (Actual Qty x std. COGSrate)] - [(Budgeted Qty x std COGS rate)

[(120 m x 1.10) + (40 m x 2.20)] - [(110 m x 1.10) + (70 m x 2.20)]

[ 132 + 88] - [ 121 + 154]

220 - 275

Rs. 55 (Favourable)

SALES MIX VARIANCE

Actual quantity x actual mix x standard rate 270

Less: Actual quantity x actual mix x standard COGS rate (220)

50
Less: Actual sales (both) x budgeted average gross profit
(120 m + 40 m) x 0.347 (55.52)

SALES MIX VARIANCE (5.52)

FINAL SALES VOLUME VARIANCE

Budget sales 337.50

Less: Budgeted COGS (275.00)
Budgeted Gross Profit 62.50
Less: Actual sales (both) x budgeted average gross profit
(120 m + 40 m) x 0.347 (55.52)
6.98
mix x Std. rate)

rate) + (actual qty x std rate)]

mix x std rate)

rate) + (Budgeted qty x std rate)]

tual qty x std COGSrate) + (actual qty x std COGSrate)]

mix x std rate)

ed Qty x std COGS rate) + (Budgeted qty x std COGS rate)]

unfavourable

unfavourable
Required no. 1: Schedule of allocation of variance:

Variances Total WIP

Material Price variance W-1 12,000 4,500

Labour efficiency variance W-2 6,000 1,200
FOH Controllable W-3 7,200 2,880
FOH Volume W-3 12,000 4,800
37,200 13,380

W-1 Material Price variance allocation

Material Variance
Inventory
WIP 60,000 4,500
FG 20,000 1,500
COGS 80,000 6,000
160,000 12,000

W-2 Labour Efficiency variance allocation

Labour Variance
Cost
WIP 20,000 1,200
FG 20,000 1,200
COGS 60,000 3,600
100,000 6,000

W-3 FOH Controllable & Volume variance allocation

FOH Controllable Volume

Cost Variance Variance
WIP 80,000 2,880 4,800
FG 20,000 720 1,200
COGS 100,000 3,600 6,000
200,000 7,200 12,000

Required no.2: COMPARATIVE COGS

Stardard Variance Actual

 Material purchased 200,000 12,000 212,000
Less: Ending R/Material (40,000) - (40,000)
Raw material used 160,000 172,000

Direct labor 100,000 6,000 106,000

Prime Cost 260,000 278,000

Factory overhead 200,000 19,200 219,200

Manufacturing cost 460,000 497,200

Less: WIP (at end) (160,000) 13,380 (173,380)

Cost of Goods manufactured 300,000 323,820

Less: Finished goods (at end) (60,000) 4,620 (64,620)

Cost of Goods Sold 240,000 259,200

Required no. 3: Income Statement (Actual Basis)

Sales 520,000
Less: Cost of goods sold (259,200)

Gross Profit (actual) 260,800

Less: Operating Expenses:

Administrative Expenses 120,000
Marketing Expenses 60,000 (180,000)

NET INCOME (Actual) 80,800

Required no. 4: Reconcilation of Standard and Actual Income:

NET INCOME (Actual) 80,800

Add: Variance allocated to COGS 19,200

Standard Income 100,000

FG COGS

1,500 6,000
1,200 3,600
720 3,600
1,200 6,000
4,620 19,200
Requried no.1: Material Price, Mix and Yeild variance:

Material Price variance:

Material Actual Price Standard Price Variance

A 2,200 2,150 50

B 1,850 1,750 100

C 1,200 1,250 50

Material Mix Variance

Formula (Difference b/w actual qty used and actual qty at std mix) x Standa

MateActual Standard Actual Qty

Quantity used Mix % at Std. mix

A 1,870 50 1,705

B 1,100 40 1,364

C 440 10 341
3,410 100 3,410

Material Yeild Variance

Formula (Difference b/w actual qty at std mix and std qty at std mix) x Stand

Mat Actual Qty Standard Std. Qty at

at Std. mix Mix % Std. Mix
A 1,705 50 1,778.70

B 1,364 40 1,422.96

C 341 10 355.74
3,410 100 3,557.40

Actual production x Input ratio

3,234 tons x 110%
3,557.40

Labour hour/ efficency Variance

FormDifference between Standard and Actual hours x Standard Rate

Std. hours allowed for actual input (500 hours/ 110 input x 3,410 act. input)
Actual hours used for actual input

Difference
Standard Rate

Labour hour/ efficency Variance

Labour Rate Variance

FormDifference between Standard and Actual rate x Actual hours used

Standard rate for payment of labour

Actual rate paid to labour

Difference
Actual hours used

Labour Price Variance

Labour Yield Variance

Std. hours allowed for actual input (std. hours for actual input)
(3,410 tons x 500 hours / 110 tons)

Std. hours allowed for actual Output (std. hours for actual Output)
(3,234 tons x 500 hours /100 tons)

Difference

Std. rate of direct labor

Labour Yield Variance

1 Spending Variance
a) Actual amount of factory overhead
Fixed FOH
Variable FOH

b) Budget allowance based in actual hours

Fixed budgeted overhead
Variable budgeted OH
(Actual hours x
Variable per unit rate)

Standard Variable rate Rs. 412,500 / 16,500 hours = Rs. 25

2 Idle Capacity Variance

a) Budget allowance based in Actual hours

b) Overhead charged to production

Actual hours x
Total Standard Factory overhead rate

Standard Total FOH rate = (618,750 + 412,500) / 16,500 hours = Rs.

3 Efficiency Variance
a) Overhead charged to production (Based on Actual hours)
Actual hours allowed x
Total Standard Factory overhead rate

b) Overhead charged to production (Based on Standard hours)

Standard hours allowed for actual input x
Total Standard Factory overhead rate

4 Factory overhead Yeild variance

Std. hours allowed for actual input (std. hours for actual input x Total std. FOH rate)
(3,410 tons x 500 hours / 110 tons x Rs 62.5)

Std. hours allowed for actual Output (std. hours for actual Output x Total std. FOH ra
(3,234 tons x 500 hours /100 tons x Rs. 62.5)
 Actual QTY Material Price
Purchases Variance

Unfav. 2,000 100,000 Unfav.

Unfav. 1,200 120,000 Unfav.

Fav 500 25,000 Fav

Material Price variance 195,000 Unfav.

actual qty at std mix) x Standard price

Variance Standard priceMaterial Mix

Variance

165 unfav 2,150 ### unfav

264 fav 1,750 ### fav

99 unfav 1,250 ### unfav

MATERIAL MIX VARIANCE 16,500 unfav

and std qty at std mix) x Standard price

Variance Standard pricMaterial yeild

variance
 73.70 Fav 2,150 ### Fav

58.96 Fav 1,750 ### Fav

14.74 Fav 1,250 18,425 Fav

MATERIAL yeild VARIANCE ### Fav

s x Standard Rate

0 input x 3,410 act. input) 15,500

15,800

300 unfav
37.50

11,250 unfav

x Actual hours used

37.50
39.75

2.25 Unfav
15,800

35,550 Unfav
 15,500

tual Output)
16,170

670 Fav

rate of direct labor 37.50

our Yield Variance 25,125 Fav

553,750
424,500 978,250

618,750

15,800
x Rs 25 395,000 1,013,750
Spending Variance 35,500 Fav

412,500 / 16,500 hours = Rs. 25

1,013,750

15,800
x Rs 62.50 987,500
Idle Capacity Variance 26,250 Unfav

50 + 412,500) / 16,500 hours = Rs. 62.50

tual hours) 987,500

andard hours)
15,500
x Rs 62.50 968,750 -
Efficiency Variance 18,750 Unfav

actual input x Total std. FOH rate) 968,750

x 500 hours / 110 tons x Rs 62.5)

or actual Output x Total std. FOH rate)

x 500 hours /100 tons x Rs. 62.5) 1,010,625

41,875 Fav
W-1: Actual cost of material

Items Actual Actual Actual

Qty used Rate Cost

Alpha 109,200 7.25 791,700

Beta 149,500 3.25 485,875

Gamma 27,300 13.50 368,550

286,000 1,646,125

W-2: Actual matererial used at Standard rate:

Items Actual Standard Standard

Qty used Rate Cost

Alpha 109,200 6.50 709,800

Beta 149,500 4.00 598,000

Gamma 27,300 13.00 354,900

286,000 1,662,700

W-3: Actual material at Standard mix and Standard rate:

Items Actual Standard Mix Actual Qty Standard

Qty used at std. mix Rate

Alpha 109,200 5,200 / 13,000 = .40 114,400 6.50

Beta 149,500 6,500 / 13,000 = .50 143,000 4.00

Gamma 27,300 1,300 / 13000 = .10 28,600 13.00

286,000 286,000

W- 4: Standard material for actual production:

Actual Production 253,300

` Standard material for actual production
Input ratio 100
Output ratio 90

Actual production is 253,300 kgs which is 90% of Input

Therefore Input kgs are 253,300 / 90% 281,444 kgs

Proof:
Input 281,444
Less: 10% wastage (28,144)
Actual Production (output) 253,300

W-5: Standard material at Standard Mix and rate

Items Standard Standard Material Standard Amount

Ratio at Standard Mix Rate

Alpha 40% 112,578 6.50 731,756

Beta 50% 140,722 4.00 562,889

Gamma 10% 28,144 13.00 365,878

281,444 1,660,522

Required1: Direct Material Total Variance

Direct material total variance = Difference between Standard and Actual Cost of materia

Actual Cost of Direct material (W-1) 1,646,125

Standard Cost of Direct material (W-5) 1,660,522

Direct Material Total Variance 14,397 Fav

Required 2: Direct Material Price Variance

Material Actual Price Standard Price Variance Actual QTY

Purchases

Alpha 7.25 6.50 0.75 Unfav. 109,200

Beta 3.25 4.00 0.75 Fav 149,500

Gamma 13.50 13.00 0.50 Unfav. 27,300
Material Price variance

Required no 4: Direct Material Mix variance

Material Mix Variance

Formula (Difference b/w actual qty used and actual qty at std mix) x Standard price

Material Actual Standard Actual Qty Variance

Quantity us Mix % at Std. mix

Alpha 109,200 40 114,400 5,200 Fav

Beta 149,500 50 143,000 6,500 Unfav

Gamma 27,300 10 28,600 1,300 Fav

286,000 100 286,000 MATERIAL MIX VARIAN
Amount

743,600

572,000

371,800
1,687,400
Actual Cost of material

Material Price
Variance

81,900 Unfav.

112,125 Fav
 13,650 Unfav.
16,575 Fav

x) x Standard price

Standard Material Mix

Rate Variance

6.50 33,800 Fav

4.00 26,000 Unfav

13.00 16,900 Fav

ATERIAL MIX VARIANCE 24,700 Fav
Comparative Income Statement
Analyzing the Budgeted and Actual Operating Income

Sales (118,000 units x Rs 25)

Less: Cost of Goods sold

Cost of Goods manufactured (110,000 units x 17.60) 1,936,000
Add: Finished goods (at start) (20,000 units x 17.60) 352,000
TOTAL FINISHED GOODS AVAILABLE 2,288,000
Less: Finished goods (at end) (12,000 units x 17.60) (211,200)

COST OF GOODS SOLD (STD.) 2,076,800

Add: Unfavourable variance

Material quantity variance (W-4) 24,000
Labour price variance (W-7) 25,760
FOH Controllable variance (W-8) 16,500
66,260 66,260

Less: Favourable variance

Material Price Variance (W-5) 3,750
Labour hour variance (W-6) 32,000
FOH Volume variance (W-9) 7,000
42,750 (42,750)
COST OF GOODS SOLD (Actual)

GROSS PROFIT (ACTUAL)

Less: Operating Expenses
Administrative and marketing expenses
NET INCOME (ACTUAL)

W-1: Calculation of numbers of units sold:

Units
Finished goods (at start) 20,000
Add: Production during the period 110,000
Total FG available for sales 130,000
Less: Finished goods (at end) (12,000)
UNITS SOLD 118,000

W-2: Per unit cost of Product:

Direct material per unit (2 units x 1.50) 3.00

 Direct Labor per unit (1.50 hours x 8) 12.00
Variable FOH per unit 1.50
Fixed FOH per unit 1.10
Per unit cost of Product 17.60

W-3: Equivalent Production Unit

Material
Unit in process (at start) 10,000
Add: Units put into production 240,000
Total Work in process 250,000
Less: Unit in process (at end) (15,000)
Units completed 235,000
Less: Unit in process (at start) - all units (10,000)
225,000
Add: Units in process (at start) - 3/5 completed 6,000
231,000
Add: Units in process (at end) - 1/3 completed 5,000
Actual Material used 236,000

W-4 Material Quantity Variance

Formula: Difference between Standard and Actual Quantity x Standard Rate

Standard quantity allowed for production

(110,000 units x 2 lbs per unit) 220,000

Actual quantity used in production 236,000

Difference 16,000
Standard Rate 1.50

Material quantity variance 24,000

W-5 Material Price Variance

Formula: Difference between Standard and Actual rate x Actual quantity purchased

Standard rate for purchases 1.500

Actual rate on purchases 1.485
 Difference 0.015 Fav
Actual Quantity 250,000

Material price variance 3,750 Fav

W-6 Labour hour/ efficency Variance

Standard hours allowed for production
(110,000 units x 1.5 hours per unit) 165,000

Actual hours used in production

161,000 (1,313,760 / 8.16)
Difference 4,000 Fav
Standard Rate 8

Labour hour/ efficency Variance 32,000 Fav

W-7 Labour Price Variance

Standard rate for payment of labour 8.00
Actual rate paid to labour 8.16

Difference 0.16 UnFav

Actual hours used 161,000

Labour Price Variance 25,760 UnFav

Fatory over head Variance

2 - Variance method

W-8 1 Controllable Variance

a) Actual amount of factory overhead
Fixed FOH
Variable FOH

b) Budget allowance based in standard hours allowed

Fixed budgeted overhead
 Variable budgeted OH
(Standard hours allowed x 110,000
Variable per unit rate) 1.50
CONTROLLABLE VARIANCE

W-9 2 Volume Variance

a) Budget allowance based in standard hours allowed

b) Overhead charged to production

Standard hours allowed x 110,000
Total Standard Factory overhead rate 2.60
VOLUME VARIANCE
 2,950,000

(2,100,310)

849,690

(651,000)
198,690
Unfav
per lbs

Unfav
13,760 / 8.16)

nce

114,000
181,500 295,500

114,000
165,000 279,000
16,500 Unfav

279,000

286,000
7,000 Fav