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Standard Costing Example Solution

(1) The document provides an example of standard costing calculations for materials and labor for an actual output of 3,500 units. (2) It calculates various variances for direct materials, direct labor, variable overhead, and fixed overhead. (3) The key variances calculated include material price and usage variances, labor wage rate and efficiency variances, variable and fixed overhead spending variances, and a fixed overhead volume variance.

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Vikas Khurana
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363 views2 pages

Standard Costing Example Solution

(1) The document provides an example of standard costing calculations for materials and labor for an actual output of 3,500 units. (2) It calculates various variances for direct materials, direct labor, variable overhead, and fixed overhead. (3) The key variances calculated include material price and usage variances, labor wage rate and efficiency variances, variable and fixed overhead spending variances, and a fixed overhead volume variance.

Uploaded by

Vikas Khurana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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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 Amount


Units Rs. Rs.
Standard cost 3500 50.00 1,75,000
Actual cost 3600 52.50 1,89,000

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

Labour hours Rate per hours Rs Amount Rs


Standard cost 7000 30 210,000
Actual cost 6800 32.50 221,000

Budgeted standard rate Actual rate


Total variable expense 70,000 62,000
Rs. (3,500 x 20)
Fixed expenses (Rs. ) 1,92,000 1,88,000
Output (units) 4800 3500
Hours 9600 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 verify, 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)

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