## 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 Corn Syrup 0.40 0.42 0.02 Sugar 0.10 0.11 0.01 Material Mix Variance: MMV = (Difference b/w Actual qty at actual mix and actual qty at std mix) x std ra Material Actual Qty Std. Mixing Actual Qty at actual mix Ratio at Std. Mix Gum Base 157,000 0.6667 154,000 Corn Syrup 38,000 0.1667 38,500 Sugar 36,000 0.1667 38,500 231,000 1 231,000 Working no.1: Calculation of Standard Mixing Ratio: Material Qty Std. Mix Gum Base 800 0.6667
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### 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
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
MMV = (Difference b/w Actual qty at actual mix and actual qty at 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 Variance2 - Variance method
1 Controllable Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH 100,000
b) Budget allowance based in standard hours allowedFixed budgeted overheadVariable budgeted OH(Standard hours allowed xVariable per unit rate) - 120,000
CONTROLLABLE VARIANCE 20,000
2 Volume Variancea) Budget allowance based in standard hours allowed 120,000
b) Overhead charged to productionStandard hours allowed xTotal Standard Factory overhead rate 150,000
VOLUME VARIANCE 30,000
3 - Variance method
1 Spending Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH -
b) Budget allowance based in actual hours Fixed budgeted overheadVariable budgeted OH(Actual hours xVariable per unit rate) - -
Spending Variance -
2 Idle Capacity Variancea) Budget allowance based in Actual hours -
b) Overhead charged to productionActual hours xTotal Standard Factory overhead rate -
Idle Capacity Variance -
3 Efficiency Variancea) Overhead charged to production (Based on Actual hours)Actual hours allowed xTotal Standard Factory overhead rate -
b) Overhead charged to production (Based on Standard hours)
Standard hours allowed xTotal 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 purchased
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
Difference between Standard and Actual Quantity x Standard Rate
Difference between Standard and Actual 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
Difference between Standard and Actual rate x Actual quantity purchased
Difference between Standard and Actual rate x Actual 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
Difference between Standard and Actual hours x Standard Rate
Difference between Standard and Actual rate x Actual hours used
Solution of Ex -4
Fatory over head Variance2 - Variance method
1 Controllable Variancea) Actual amount of factory overhead
(Actual hours worked x 4,400 Variable per unit rate) 1.50 6,600
Spending Variance
2 Idle Capacity Variancea) 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 Variancea) Overhead charged to production (Based on Actual hours)Actual hours allowed xTotal Standard Factory overhead rate
b) Overhead charged to production (Based on Standard hours)Standard hours allowed xTotal Standard Factory overhead rate
Efficiency Variance
4 - Variance method
1 Spending Variancea) Actual amount of factory overhead
Fixed FOHVariable FOH
b) Budget allowance based on actual hours Fixed budgeted overheadVariable 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 ORDifference 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 ORDifference 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 ORDifference 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.
Fatory over head Variance
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
b) Overhead charged to production (Based on Standard hours) 4,500 2.40 10,800
(240) F
11,000
4,500
6,600 11,100 100 Fav
11,100
-
(11,100) Fav
Difference between actual hours and Standard hours x variable FOH rate
(4,400 hours x 0.90) 3,960
(4,500 hours x 0.90) 4,050
90 Fav
Difference between actual hours and Standard hours x Fixed FOH rate
4,500
3,960
540 Unfav
Difference between actual hours and Normal capacity 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 Variance2 - Variance method
1 Controllable Variance
a) Actual amount of factory overheadFixed FOH 11,250 Variable FOH 25,090
b) Budget allowance based in standard hours allowedFixed 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 Variancea) Budget allowance based in standard hours allowed
b) Overhead charged to productionStandard hours allowed x 47,040 Total Standard Factory overhead rate 0.75
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
Note: Unfavourable rate = Rs. 760 labor rate variance / 3,800 actual 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. rate)
[(Actual qty x actual rate) + (actual qty x actual rate)] - [(Actual qty x std 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 rate)
[(Actual Qty x std rate) + (Actual Qty x std. rate)] - [(Budgeted Qty x std rate) + (Budgeted qty x std rate)]
[(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 std COGSrate) + (actual qty x std COGSrate)]
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) + (Budgeted qty x std COGS rate)]
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 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 rate)]
[(6,000 x 10) + (2,000 x 20)] - [(6,000 x 12.5) + (2,000 x 25)]
(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 std rate)]
[(6,000 x 12.5) + (2,000 x 25)] - [(5,000 x 12.5) + (3,500 x 25)]
[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
(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) + (Budgeted qty x std COGS rate)]
125,000
(100,000)
25,000 Less: Actual sales (both) x budgeted average 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 rate)]
[(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 std rate)]
[(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) + (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) + (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
(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 rate)]
(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 std rate)]
[(Actual qty x actual COGS rate) + (actual qty x actual COGSrate)] - [(Actual qty x std COGSrate) + (actual qty x std COGSrate)]
(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) + (Budgeted qty x std COGS rate)]
unfavourable
unfavourable
Required no. 1: Schedule of allocation of variance: