1 STANDARD COSTING HOMEWORK A.1. WN 1: Calculation of effect on the profit due to market size = increase size to due units in Growth (total) units in Growth growth to due profit in Increase = %) 3 000 , 00 , 4 ( 000 , 12 20,000 1,40,000 (4,20,000 – 4,00,000) = 84,000 (F) WN 2: Calculation of effect on profit due to increase in market share = 000 , 8 20,000 1,40,000 = 56,000 WN 3: Calculation of effect on profit due to product differentiation Particulars Amount Increase in profit due to market share (WN 2) 56,000 Increase in profit due to changes in price (given) 1,64,000 2,20,000 Operating statement showing the effect of size, productivity and product differentiation on the profit of 2016 Particulars Amount Profit of 2015 10,80,000 (+) Increase in profit due to market size increase (WN 1) 84,000 (+) Increase in profit due to productivity factor (given) 58,000 (+) Increase in profit due to product differentiation (WN 3) 22,000 14,42,000 A.2. WN 1: Calculation of standard hours for actual days = months 12 hours 1,86,000 = 15,500 hours WN 2: Calculation of actual hours = 22 days 100 workers 8 hours = 17,600 hours WN 3: Calculation of standard hours for actual output = X Y (1200 8) (800 12) = 19,200 hours Now, Capacity Ratio = 100 days actual for hrs. Std. Hours Actual = 100 15,500 17,600 = 113.55% Efficiency Ratio = 100 Hours Actual Output Actual for hrs. Std. = 100 17,600 19,200 = 109.09% Volume Ratio/Activity Ratio = 100 Days Actual for hours Std. Output Actual for hours Std. = 100 15,500 19,200 = 123.87% Inter-relationship: Volume Ratio = Capacity Ratio Efficiency Ratio= 113.55% 109.09%= 123.87%
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1
STANDARD COSTING
HOMEWORK A.1. WN 1: Calculation of effect on the profit due to market size
= increase size to due units in Growth(total) units in Growth
growth to due profit in Increase
= %)3000,00,4(000,1220,000
1,40,000
(4,20,000 – 4,00,000)
= 84,000 (F)
WN 2: Calculation of effect on profit due to increase in market share
= 000,820,000
1,40,000 = 56,000
WN 3: Calculation of effect on profit due to product differentiation
Particulars Amount
Increase in profit due to market share (WN 2) 56,000
Increase in profit due to changes in price (given) 1,64,000
2,20,000
Operating statement showing the effect of size, productivity and product differentiation on the profit of 2016
Particulars Amount
Profit of 2015 10,80,000
(+) Increase in profit due to market size increase (WN 1) 84,000
(+) Increase in profit due to productivity factor (given) 58,000
(+) Increase in profit due to product differentiation (WN 3) 22,000
14,42,000
A.2. WN 1: Calculation of standard hours for actual days
= months 12
hours 1,86,000= 15,500 hours
WN 2: Calculation of actual hours
= 22 days 100 workers 8 hours
= 17,600 hours
WN 3: Calculation of standard hours for actual output
= X Y
(1200 8) (800 12)
= 19,200 hours
Now,
Capacity Ratio = 100days actual for hrs. Std.
Hours Actual = 100
15,500
17,600 = 113.55%
Efficiency Ratio = 100Hours Actual
Output Actualfor hrs. Std. = 100
17,600
19,200 = 109.09%
Volume Ratio/Activity Ratio = 100Days Actualfor hours Std.
Output Actualfor hours Std. = 100
15,500
19,200 = 123.87%
Inter-relationship:
Volume Ratio = Capacity Ratio Efficiency Ratio= 113.55% 109.09%= 123.87%
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING
1) While calculating LMV, there is no need to calculate the Revised Standard Mix because the given mix is already comparable with the actuals.
2) In the said question, output is not expressed in real terms but it is expressed in terms of equivalent std. hours and as per the standards if one hour is worked output should be equal to one standard hour.
Particulars Standards Actuals Standard Calculations
Unit 10,000 8,000 1 unit = ₹ 20
Overhead 2,00,000 1,84,000 1 hour = ₹ 1
(10,000 20) 1 unit = 20 hours
Hours 2,00,000 1,70,000
8,000 1,60,000
10,000 (?)
Idle Hrs. - 4,000
FOH Cost Variance = FOH recorded – FOH incurred
= [(8,000 20) – 1,84,000]
FOHCV = 24,000 (A)
FOH Exp. Variance = Std. FOH – Actual FOH
= 2,00,000 – 1,84,000
= 16,000 (F)
FOH Volume Variance = (SQ – AQ) Std. Recovery Rate per unit
= (10,000 – 8,000) 20= 40,000 (A)
FOH Capacity Variance = (Std. hours for Actual Day – AH) Std. Recovery Rate per hour
= (2,00,000 – 1,70,000) 1= 30,000 (A)
FOH Efficiency Variance = (Std. hrs. for A.O. – AH) Std. Recovery Rate per hour
= [(8,000 20) – 66,000) 1= 6,000 (A)
Idle Time Variance = Idle Hours Std. Recovery Rate per hour
= 4,000 1= 4,000 (A)
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING
5
Sales Statement
Given Standard Standards (1 year) Actuals (1 year)
Type Qty. Qty. SP Amount Qty. SP Amount
- - 10,000 140 14,00,000 8,000 140 11,20,000
(11,20,000/8,000)
Sales Value Variance = Std. Sales Value – Actual Sales Value
= 14,00,000 – 11,20,000 = 2,80,000 (A)
Sales Price Variance = (Std. SP – Actual SP) A.Q.
= (140 – 140) 8,000
= Nil
Sales Volume Variance = (SQ – AQ) Std. SP
(Impact on Sales) = (10,000 – 8,000) 140
= 2,80,000 (A)
Sales Volume Variance = (SQ – AQ) Std. Profit per unit
(Impact on profit) = (10,000 – 8,000) 32 (given)
= 64,000 (A)
Reconciliation Statement reconciling the standard profit with actual profit
Particulars Amount
Standard Profit (32 10,000) 3,20,000
Add/(Less): Variances
Material Price Variance (66,000)
Material Rate Variance (10,000)
Labour Rate Variance (6,800)
Idle Time Variance (8,000)
Labour Net Efficiency Variance (12,000)
Variable OHs Expenditure Variance 6,400
Variable OHs Efficiency Variance (2,400)
Fixed OHs Expenditure Variance 16,000
Fixed OHs Capacity Variance (30,000)
Fixed OHs Efficiency Variance (6,000)
Idle Time Variance (4,000)
Sales Price Variance Nil
Sales Volume Variance (Impact on Profit) (64,000)
Actual Profit 1,33,200
A.6. Material Statement
Given Standard
1 unit
Comparable Standard
(4,000 units)
Actuals
(4,000 units)
Type Kgs. Qty. Rate Amount Qty. Rate Amount
- 3 kgs. 12,000 5 60,000 12,500 5.25 65,625
(WN 1) (WN 3)
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING
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WN 1: Calculation of Actual Quantity Consumed
MUV = (SQ – AQ) SR
- 2,500 = (12,000 – AQ) S
- 500 = 12,000 – AQ
= 12,500
WN 2: Calculation of Actual Qty. of Material Purchased
MPV = (SR – AR) AQ Purchased
- 3,250 = (5 – AR) AQP
- 3,250 = 5 AQP – AR . AQP
- 3,250 = 5 AQP – 68,250
5AQP = 65,000
= 13,000
WN 3: Calculation of Actual Purchase Price/Kg.
Ar = 13,000
68,250= 5.25 kgs.
Methods of Calculating Material Price Variance
1) Partial Plan:
Under this method/plan, material price variance is always calculated on the actual quantity of material consumed in that particular period irrespective of the actual quantity purchased.
MPV = (SR – AR) Actual Quantity Consumed
2) Single Plan:
Under this method, material price variance is always calculated on the actual quantity of material purchase in that particular period irrespective of whether the entire quantity purchases has been consumed or not in that period.
MPV = (SR – AR) Actual Quantity Purchased
Labour Statement
Given Standard
(1 unit)
Comparable Standard
(4,000 units)
Actuals
(4,000 units)
Type Hours Hours Rate Amount Hour Rate Amount
- 0.5 2,000 20 40,000 1,900 21 39,900
(WN 4) (WN 5)
WN 4: Calculation of Actual Hours
LEV = (SH – AH) SR
2,000 = (2,000 – AH) 20 = 1,900 hrs.
WN 5: Calculation of AR per hour
LRV = (SR – AR) AH
- 1,900 = (20 – AR) 1,900
- 1 = 20 – AR
AR = 21 ₹
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING
7
i) Standard Direct Labour allowed for actual output achieved = 2,000 hours
ii) Actual Direct Labour allowed = 1,900 hours
iii) Actual Direct Labour Rate = ₹ 21
iv) Standard Quantity of Direct Material allowed (in kgs.) = 12,000 kgs.
v) Actual Quantity of Direct Material used (in kgs.) = 12,500 kgs.
vi) Actual Quantity of Direct Material purchased (in kgs.) = 13,000 kgs. vii) Actual Material Price per kg. = ₹ 5.25
A.7. Sales Statement
Standards (1 year)
Actuals (1 year)
Type Qty. SP Amount Qty. SP Amount
- 6,00,000 100 6 crores 7,00,000 110 7.7 crores
100
crores 6
(assumed)
110
crores 7.70
(100+10%)
Sales Price Variance = (Std. SP – Actual SP) AQ = (100 – 110) 7,00,000 = 70 lacs (F)
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING
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Material Statement
Given Standard
(20,000 units)
Comparable Standard
(24,000 units)
Actuals
(24,000 units)
Type Qty. Qty. Rate Amount Qty. Rate Amount
A 10,000 12,000 0.30 3,600 16,000 0.20 3,200
B 10,000 12,000 0.70 8,400 10,000 0.80 8,000
20,000 24,000 12,000 26,000 11,200
Material Price Variance = (SR – AR) AQ
A = (0.30 – 0.20) 16,000 = 1,600 (F)
B = (0.70 – 0.80) 10,000 = 1,000 (A)
600 (F)
MUV = (SQ – AQ) SR
A = (12,000 – 16,000) 0.30 = 1,200 (A)
B = (12,000 – 10,000) 0.70 = 1,400 (F)
= 200 (F)
Revised Mix
A = 000,26000,24
000,12 = 13,000 units
B = 000,26000,24
000,12 = 13,000 units
MMV = (Revised Mix – Actual Mix) SR
A = (13,000 – 16,000) 0.30 = 900 (A)
B = (13,000 – 10,000) 0.70 = 2,100 (F)
= 1,200 (F)
MYV = (TSQ – TAQ) Std. Avg. Rate
= (24,000 – 26,000) 000,24
000,12
= 1,000 (A)
Labour Statement
Given Standard
(20,000 units)
Comparable Standard
(24,000 units)
Actuals
(24,000 units)
Net Hours
Type Hrs. Hours Rate Amount Hours Rate Amount Hours
S 9,000 10,800 3 32,400 13,000 2.95 38,350 12,000
(13,000-1,000)
U 5,200 6,240 2.5 15,600 6,300 2.60 16,380 6,300
14,200 17,040 48,000 54,730 18,300
LRV = (SR – AR) AQ
Skilled = (3 – 2.95) 13,000 = 650 (F)
Unskilled = (2.5 2.6) 6,300 = 630 (A)
20(F)
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING
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Idle Time Variance = Idle Hours SR
(Skilled) = 1,000 3 = 3,000 (A)
Net Efficiency Variance = (TSH – TAH) Std. Avg. Rate
= (17,040 – 18,300) 040,17
000,48= 3,549 (A)
Revised Mix
Skilled = 300,18040,17
800,10 = 11,599
Unskilled = 300,18040,17
240,6 = 6,701
LMV = (Revised Mix – Actual Mix) SR
Skilled = (11,599 – 12,000) 3 = 1,203 (A)
Unskilled = (6,701 – 6,300) 2.5 = 1,002.50 (F)
200.50 (A)
LMV ≅ 201 (A)
Variable Overhead Statement
Type
(20,000 units)
Comparable Standard
(24,000 units)
Actuals
(24,000 units)
Qty. Qty. Rate Amount Qty. Rate Amount
20,000 24,000 0.5 12,000 24,000 0.625 15,000
VOH Expd. Variance = (SR – AR) AQ
= (0.5 – 0.625) 24,000
VOH Expd. Variance = 3,000 (A)
Note: Variable overhead statement is generally prepared for the same no. of hours for which the labour statement is prepared but in this question workers are of two types & hence the total no. of hours to be taken in the statement becomes difficulty because out of skilled & unskilled hours there may be some common hours & some uncommon hours, also information of which is not given in question. Hence, the statement is prepared by taking quantity as base instead of hours.
Fixed Overhead Statement
Particulars Standards
(1 month)
Actuals
(1 month)
Std. Calculations
Fixed Overhead 20,000 18,020 1 unit = ₹ 1
Units 20,000 24,000
Hours - -
(Two types of workers so, writing hours is not possible)
Fixed OHs Volume Variance = (SQ – AQ) Std. RR per unit = (20,000 – 24,000) 1
FOH Volume Variance = 4,000 (F)
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING
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Reconciliation Statement reconciling the Budgeted & Actual Profit
Particulars Amount
Standard Profit 20,000
Add/(Less: Variances
Sales Volume Variance 2,000
Sales Price Variance (2,000)
Material Price Variance 600
Material Mix Variance 1,200
Material Yield Variance (1,000)
Labour Rate Variance 20
Idle Time Variance (3,000)
Net Efficiency Variance (3,549)
Labour Mix Variance (201)
Variable Overhead Expd. Variance (3,000)
Fixed Overhead Expd. Variance 1,980
Fixed Overhead Volume Variance 4,000
Actual Profit 17,050
A.9. WN 1: Calculation of Raw Material Consumed (Qty.)
Particulars A B
Opening Qty. 35 40
(+) Purchases 800 1,200
(-) Closing Qty. (5) (50)
RM Consumed 830 Kgs. 1,190 Kgs.
WN 2: Calculation of Break up of Raw Material Consumed (assuming FIFO Method)
A
830 Kgs.
B
1,190 Kgs.
35 kgs. 795 kgs. 40 kgs. 1,150 kgs.
Rate ₹ 4 ₹ 4.25 ₹ 3 ₹ 2.5
(SR)
kgs. 800
3,400 Rs.
(SR)
kgs. 1,200
3,000 Rs.
Note: Since the rates for opening stock are not given in question hence their rates are assumed to be the same as the Standard Rates. (Because standard for future are normally based on past actual figures)
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / STANDARD COSTING