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Costing Math

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35 views2 pages

Costing Math

Uploaded by

shnaharhamied
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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5.(a) The June idle capacity variance was zero, and the spending variance was Tk.

600,
unfavorable. The July idle capacity variance was Tk.800, unfavorable, and spending variance
was zero. June overhead was Tk.7,000 for an output of 800 tons, while July overhead was
Tk.5,600, and output was 600 tons. In August, output was 900 tons and actual factory overhead
was Tk.7,100.
Required:
Prepare a columnar analysis, indicating actual, budget allowance, applied, total variance, spending
variance, and idle capacity variance for each month. (2017)
Solution to Budget Applied Total Variance Spending Idle Capacity
the Q. No. Allowance variance variance
5(a) Actual
June(800) Tk. 7,000 Tk. 6,400 Tk. 6,400 Tk. 600 Tk. 600 -0-
tons
July (600) Tk.5,800 Tk. 5,600 Tk. 4,800 Tk. 800 -0- Tk. 800
tons
August Tk. 7,100 Tk. 6,800* Tk. 7,200** Tk.(100) Tk. 300 Tk. (400)
(900) tons
∗𝑇𝑘.6,400−𝑇𝑘.5,600800−600= 𝑇𝑘.800200=Tk. 4 variable portion of rate
Tk. 8 total rate (Tk. 6,400 ÷ 800)
4 variable portion
Tk. 4 fixed portion
Tk. 4 x 800 tons = Tk. 3,200 fixed cost budgeted because at the 800 ton level, the idle capacity variance
is zero.
Hence, budget allowance for 900 tons:
Fixed factory overhead budgeted Tk. 3,200

Tk. 6,800
Variable factory overhead (900 tons x Tk. 4) 3,600

**900 tons x Tk. 3 = Tk. 7,200

2.What do you mean by variance analysis? Is a favorable variance always positive for the
organization? Explain.
3.Is a favorable variance always good for an organization? Justify with examples.
(c) Kalatia Company produces a single product. Variable manufacturing overhead is
applied to products on the basis of direct labor-hours. The standard costs for one unit
of product are as follows:
Direct material: 6 ounces at Tk. 50 per ounce Tk. 300
Direct labor: 0.6 hours at Tk. 300 per hour 180
Variable manufacturing overhead: 0.6 hours at Tk. 100 per hour 60
Total standard variable cost per unit Tk. 540
During June, 2,000 units were produced. The costs associated with June’s operations
were as follows:
Material purchased: 18,000 ounces at Tk. 48 per ounce Tk. 864,000
Material used in production: 14,000 ounces —
Direct labor: 1,100 hours at Tk. 315 per hour Tk. 346,500
Variable manufacturing overhead costs incurred Tk. 121,000
Instructions:
Compute the following variances:
(i) Direct material price, quantity, and total variances
(ii) Direct labor rate, efficiency, and total variances
(iii) Variable overhead rate, efficiency, and total variances (2023 sep)

Ans…(i) Direct material price, quantity, and total variances:


Actual price Tk. 48
Actual quantity Purchased: 18,000; Used: 14,000
Standard price Tk. 50
Standard quantity 6×2,000=12,000
Price variance = (Actual price – Standard price) × Actual quantity purchased
= (48 – 50) × 18,000
= Tk. 36,000 Favorable
Quantity variance = (Actual quantity used – Standard quantity) × Standard price
= (14,000 – 12,000) × 50
= Tk. 100,000 Unfavorable
Total variance = Tk. 36,000 Favorable + Tk. 100,000 Unfavorable
= Tk. 64,000 Unfavorable
(ii) Direct labor rate, efficiency, and total variances:
Actual rate Tk. 315
Actual hour 1,100
Standard rate Tk. 300
Standard hour 0.6×2,000=1,200
Rate variance = (Actual rate – Standard rate) × Actual hour
= (315 – 300) × 1,100
= Tk. 16,500 Unfavorable
Efficiency variance = (Actual hour – Standard hour) × Standard rate
= (1,100 – 1,200) × 300
= Tk. 30,000 Favorable
Total variance = Tk. 16,500 Unfavorable + Tk. 30,000 Favorable
= Tk. 13,500 Favorable
(iii) Variable overhead rate, efficiency, and total variances:
Actual rate 121,000/1,100=Tk. 110
Actual hour 1,100
Standard rate Tk. 100
Standard hour 0.6×2,000=1,200
Rate variance = (Actual rate – Standard rate) × Actual hour
= (110 – 100) × 1,100
= Tk. 11,000 Unfavorable
Efficiency variance = (Actual hour – Standard hour) × Standard rate
= (1,100 – 1,200) × 100
= Tk. 10,000 Favorable
Total variance = Tk. 11,000 Unfavorable + Tk. 10,000 Favorable
= Tk. 1,000 Unfavorable

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