CAF – 03 [Test – 8] SOLUTION

Standard costing

Solution 1
Quantity table
Material SQ in SM AQ in AM AQ in SM
[1] [2] [3]
P 1,710 1,680 1,800
[15 x 3,648 / 32] [1,710 x 4,200/3,990]
Q 1,368 1,650 1,440
[12 x 3,648 / 32] [1,368 x 4,200/3,990]
R 912 870 960
[8 x 3,648 / 32] [912 x 4,200/3,990]
3,990 4,200 4,200

Variances
Material Price variance Usage variance Mix variance Yield variance
[2 x (SC – AC)] [(1 – 2) x SC] [(3 – 2) x SC] [(1 – 3) x SC]
P (4,200) 1,200 4,800 (3,600)
Q 3,300 (8,460) (6,300) (2,160)
R (3,480) 2,520 5,400 (2,8,80)
(4,380) (4,740) 3,900 (8,640)

Solution 2
Standard card (per unit)
Qty Rate (Rs.)
Sale price 540.00 [27,000,000 / 50,000(W-1)]

Direct material 3 Kg 50.00 [7,500,000 / 150,000(W-2) Kg]

Direct labor [125,000(W-3)/50,000] 2.5 hours 75.00 [50 x 150%]
Variable OH 2.5 hours 24.00 [3,000,000 / 125,000]

W-1
Budgeted production = 1,500 / 3% = 50,000 units

W-2
Budgeted material consumption = 50,000* x 3Kg = 150,000 Kg

W-3
Budgeted labor hours = 9,375,000 / 75 = 125,000 hours

Variances
(1) Sale price variance (2) Sale volume variance
= Actual sales – AQ (sale) x SP = AQ (sale) x S. Cont. – BQ (sale) x S. Cont.
= 27,295,000 – 51,500* x 540* = 51,500 x 142.5* – 50,000 x 142.5
= (515,000) = 213,750

* 50,000 + 1,500 = 51,500 units * 7,125,000 / 50,000 = Rs. 142.50 per unit

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 CAF – 03 [Test – 8] SOLUTION
Standard costing

(3) Material price variance (4) Material usage variance

= AQ x SC – AQ x AC = SQ x SC – AQ x SC
= 159,650Kg* x 50 – 8,461,450 = 154,500Kg* x 50 – 159,650Kg x 50
= (478,950) = (257,500)

* 8,461,450 / (50 x 1.06) = 159,650 Kg * 51,500 x 3 = 154,500 Kg

(5) Labor rate variance (6) Labor efficiency variance

= AH x SR – AH x AR = SH x SR – AH x SR
= 135,187.5 hours* x 75 – 9,463,125 = 128,750 hours* x 75 – 135,187.5 hours x 75
= 675,938 = (482,813)

* 51,500 x (2.5 + 0.125) = 135,187.5 hours * 51,500 x 2.50 = 128,750 hours

(7) variable OH spending variance (8) Variable OH efficiency variance

= AH x SR – AH x AR = SH x SR – AH x SR
= 135,187.5 hours x 24 – 2,974,125 = 128,750 hours x 24 – 135,187.5 hours x 24
= 270,375 = (154,500)

Reconciliation
----------- Rs. ----------
Budgeted contribution 7,125,000
Sale variances:
Sale price variance (515,000)
Sale volume variance 213,750 (301,250)
Cost variances:
Material price variance (478,950)
Material usage variance (257,500)
Labor rate variance 675,938
Labor efficiency variance (482,813)
Variable OH spending variance 270,375
Variable OH efficiency variance (154,500) (427,450)
Actual contribution 6,396,300

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