Standard Costing Example Solution 1o3157

Standard Costing Example Solution WORKING NOTE:

1.Calculation of standard and actual cost of material for actual output i.e. 3500 units Material qty. Rate per unit Units Rs. 3500 50.00 3600 52.50

Standard cost Actual cost

Amount Rs. 1,75,000 1,89,000

2.Standard and actual labour costs for actual output of 3500 units Standard cost Actual cost

Labour hours 7000 6800

Rate per hours Rs Amount Rs 30 210,000 32.50 221,000

3 Total variable expense Rs. (3,500 x 20) Fixed expenses (Rs. ) Output (units) Hours

Budgeted standard rate Actual rate 70,000 62,000 1,92,000 4800 9600

1,88,000 3500 6800

Standard fixed rate per unit (Rs. 1,92,000 / 4,800)

40

Standard fixed expenses per (Rs.) hour (1,92,000 /9600)

20

(1) Direct material variances a Direct material cost variance = Standard cost – Actual cost = 1,75,000 – 1,89,000 = Rs. 14,000 (A) b Material price variance= Actual quantity (Standard price – Actual price) = 3,600 (50 – 52.50) = =Rs. 9000 (A) c Material usage variance Standard price (Standard quantity – Actual quantity) = 50 (3,500 – 3,600) = Rs. 5000 (A)

(2) Labour variance d Direct labour cost variance = Standard cost – Actual cost = 210,000 – 221,000 = Rs. 11000 (A) e Wage rate variance = Actual hours paid (Standard rate – Actual rate) = 6,800 (30 – 32.50) = Rs. 17000 (A) f Labour efficiency variance Standard rate per hour (Standard hours – Actual hours worked) = 30 (7000 – 6400) = Rs. 18,000 (F) To , let us work out Labour Idle Time Variance also. Labour Idle Time Variance = Idle time x SR = 400 x 30 = 12,000 (A) Hence, Labour Cost variance = Labour wage rate variance + Labour Efficiency Variance + Labour Idle time variance (3) Overhead variance g Variable expenses variance =Standard variable expenses – Actual variable expenses =70,000 – 62,000 =Rs. 8,000 (F) h Fixed expenses expenditure variance Budgeted fixed expenses – Actual fixed expenses = 1,92,000 – 1,88,000 = Rs. 4000 (F) i Fixed expenses volume variance Standard fixed expenses rate per unit (Actual output – Budgeted output) = 40 (3500 – 4800) = Rs. 52,000 (A) j Total cost variance = Total standard cost – Total actual cost = (3500 x 116) – 4,61,100 = Rs. 55,100 (A)