# Ii 996000 hrs x rs 125 rs 31000000 rs 100800000 rs

• 367

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(ii) (9,96,000 hrs x Rs 125) (Rs 3,10,00,000 + Rs 10,08,00,000) = Rs 12,45,00,000-Rs 13,18,00,000 = Rs 73,00,000 Adverse Verification: Total overhead cost variance = Fixed overhead cost variance + Variable overhead cost variance Rs 73,00,000 A = Rs 61,00,000 A + Rs 12,00,000 A Rs 73,00,000 A = Rs 73,00,000 A Problem 6: The following information has been extracted from the books of Goru Enterprises which is using standard costing system: Actual output = 9,000 units Direct wages paid = 1,10,000 hours at Rs 22 per hour, of which 5,000 hour, being idle time, were not recorded in production Standard hours = 10 hours per unit Labour efficiency variance = Rs 3,75,000 (A) Standard variable Overhead = Rs 150 per unit Actual variable Overhead = Rs 16,00,000 You are required to calculate: (i) Idle time variance (ii) Total variable overhead variance (iii) Variable overhead expenditure variance (iv) Variable overhead efficiency variance. Solution: Actual output = 9,000 units Idle time = 5,000 hours Production time (Actual) = 1,05,000 hours Standard hours for actual production = 10 hours/unit x 9,000 units = 90,000 hours. Labour efficiency variance = Rs 3,75,000 (A) i.e. Standard rate x (Standard Production time Actual production time) = Rs 3,75,000 (A). SR (90,000 1,05,000) = 3,75,000 SR = -3,75,000/-15,000 = Rs 25 (i) Idle time variance = 5,000 hours x 25 Rs hour = Rs 1,25,000. (A) (ii) Standard Variable Overhead = Rs 150/unit

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336 Standard hours = 10 hours/unit Standard Variable Overhead rate/hour =150/10 = Rs15/hour Total Variable Overhead variance = Standard Variable Overhead Actual Variable Overhead = Standard Rate x Standard hours Actual rate x Actual hours = (15) x (10 x 9,000) 16,00,000 = 13,50,000 -16,00,000 Total Variable Overhead Variance = 2,50,000 (A) (iii) Variable Overhead Expenditure Variance = (Standard Rate x Actual Hours) (Actual Rate x Actual Hours) = (15 x 1,05,000) 16,00,000 = 15,75,000 16,00,000 = Rs 25,000 (A) (iv) Variable Overhead Efficiency Variance = Standard Rate x (Standard Hours for actual output Actual hours for Actual output) = 15 (90,000 1,05,000) = 15 (-15,000) = Rs 2,25,000 (A) Alternative Solution: Actual Output = 9,000 Units Idle time = 5,000 hrs Direct Wages Paid = 1,10,000 hours @ Rs 22 output of which 5,000 hours being idle, were not recorded in production. Standard hours = 10 per unit. Labour efficiency variance = Rs 3,75,000 (A) Or Standard Rate (Standard Time Actual Time) = 3,75,000 Or (90,000 1,05,000) = 3,75,000/Standard Rate. Or Standard Rate = Rs 25/- (i) Idle time variance = Standard Rate x Idle time 25 x 5,000 = Rs 1,25,000 (A) (ii) Standard Variable Overhead/unit =150 Standard Rate = 150/10 = Rs 15/hour Standard Quantity = 10 hours Actual Variable Overhead = 16,00,000

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• Spring '12
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