Standard Costing & Variance

Standard costing as a management Analysis: Introduction,Meaning and limitations of Standard

Standard Cost and Budgeted Cost,
Tool, Historical costing, Estimated Costing and Costing,
Cost. Variance Analysis: Direct
Material
Determination
of Standard
Standard Cost for Direct Material, DirectCosting,
torial Quantity Variance, Matei ial Variance - Material Cost Variance, Material Rate Labour
ionce - Labour Cost Variance, Mix Variance, and Material Yield Variance, DirectVariance,
Labour Rate Variance, Labour labour
Variance, Idle Time Variance and Labour Yield Variance. efficiency Variance, Labour Mix
co 5: Given information about standard
and actual
determine Direct Material and Direct Labour Variances. performance, the student will be able to
Question 1:

The standard quantity and standard price of raw material

as follows:
required for one unit of product Aare given
Quantity (kg.) S.P. (Rs.)
Material X 2 3
Material Y 4 2
The actual production and relevant data are as follows:
Material X- 1,100 kgs. @ Rs. 3,410
Material Y- 1,800 kgs. @ Rs. 3,960
Calculate Variances. Actual production was 500 units.
Solution:

Analysis of Given Data

Materi Standar d Data Actual Data
al
Price Value Quantity Price Value
Quantity
(Kg.) (Rs.) (Rs.) (Kg.) (Rs.) (Rs.)
3.00 3,000 1,100 3.10 3,410
X 1000 (500 x 2)
2000 (500 x 4) 2.00 4,000 1,800 2.20 3,960

7,000 2,900 7,370

3000

Material saSP (Rs.) RSQSP (Rs.) AQSP (Rs.) AQAP (Rs.)

966.67 x3 = 2,900 1,100 x 3

X
1,800 x 2
Y 1933.33 x 2 = 3,867
6,767 6,900 7,370
Total 7,000

Material = Rs. 7,000

Where (1)SQSP = Standard Cost of Standard
Material = Rs 6,767
(2}RSQSP = Revised Standard Cost of
Material = Rs. 6,900
(3) AQSP = Standard Cost of Actual