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
———

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

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

(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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