Product A 250 10000 280 10800 Product B 200 6000 190 5500 Product C 150 3000

Product a 250 10000 280 10800 product b 200 6000 190

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Product A 250 10,000 280 10,800 Product B 200 6,000 190 5,500 Product C 150 3,000 180 3,500 ———– ———– 19,000 19,800 ———– ———– Product Standard selling price per unit Standard product costs per unit Rs. Rs. A 40 31 B 30 25 C 20 15 Labour Rs. Standard labour cost per hour 0,90 Budgeted hours 4,000 Actual clocked hours 4,400 Standard hours produced 4,500 Actual labour cost 4,260 Materials Standard cost of material actually used 5,230 Standard cost of material allowed 5,330 Actual cost of material used 5,430 Overheads Budgeted rates of overhead recovery per labour hour: Fixed 0.50 Variable 1.00 ——– 1.50 ——– Actual overhead costs : Fixed 2,000 Variable 4,300 ———
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Total 6,300 ——— Required : Prepare the operating statement for April 1986 in the same form as for March 1986. Answer Zed Ltd. OPERATING STATEMENT FOR APRIL 1986 Reference to Standard and Actual Workings Variances Rs. Rs. Sales-Budgeted 19,000 Variance due to: Volume of orders (1) 1,500 Selling prices (1) (700) 19,800 Profit-Budgeted 250 × Rs. 9 = 2250 200 × Rs. 5 = 1000 150 × Rs. 5 = 750 4,000 ——– Variance due to: Sales Volume (2) 370 Sales Price (1) (700) 3,670 ——— Production Cost Variances : Labour—Rate (3) (300) —Efficiency 90 ——— (210) Material—Price (4) (200) —Usage 100 ——— (100) Overhead Expenditure—Fixed (6) —Variable (5) 100 Efficiency—Fixed Rs. 50 (6)(5) —Variable Rs. 100 ——— 150 Capacity (6) 200 450 —— ——– Operating Profit 3810 ——– Note : Figures in brackets are adverse variances. Workings (1) Sale Variances Rs. Rs. Variance Actual sales 19,800
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Actual sale at Std. prices 700 A Sales price and 280 × Rs. 40 + 190 × Sales margin Rs. 30 + 180 × Rs. 20) 20,500 price variance 1500 F Sales volume variances Budgeted sales 19,000 (2) Sales Volume Margin Variance Std. margin on actual sales (280 × Rs. 9 + 190 × Rs. 5 + 180 × Rs. 5) 4,370 Budgeted Margin 370 F Sales margin (250 × Rs. 9 + 200 × Rs. 5 volume variance + 150 × Rs. 5) 4,000 (3) Labour Variances: Actual labour cost 4,260 Actual hours at Std. rate 300 A Wage rate (4400 × Rs. 0.90) 3,960 variances Std. labour cost of actual production 90 F Efficiency Variance (4500 × Rs. 0.90) 4,050 (4) Material Variances: Actual material cost 5,430 200 A Price variance Std. cost of material used 5,230 Std. material cost of actual 100 F Usage variance Production 5,330 (5) Variable Overheads : Actual Expenditure 4,300 100 F Expenditure Allowed expenditure for variance Actual hours (4,400) 4,400 100 F Efficiency Allowed expenditure for variance Standard hours (4,500) 4,500 (6) Fixed Overheads Variances : Actual expenditure 2,000 Nil Expenditure Budgeted expenditure variance
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(4,400 × Rs. 0.50) 2,000 Actual hours × Fixed overhead Recovery rate 200 F Capacity (4,400 × Rs. 0.50) 2,200 variance Std. hours of production × Fixed overhead recovery rate 50 F Efficiency (4,500 × Rs. 0.50) 2,250 variance Note : A = Adverse F = Favourable variance. Question 4 May1987 Jumbo Enterprises manufactures one product, and the entire product is sold as soon as it is produced. There are no opening or closing stocks and work in progress is negligible. The company operates a standard costing system and analysis of variances is made every month. The standard cost card for the product is as follows: Rs.
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