Less adverse price variance 1170 total standard

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Less : Adverse price variance ` 1170 Total Standard Material Cost ` 11700 Total standard material cost ÷ Standard price kg = 11700 ÷ 1.50 = 7800 kg Iv Actual Rate Per Labour hour Actual direct wages ` 16324 Add: Favourable Labour rate variance ` 636 Total Standard Wages Cost ` 16960 Actual hours worked = standard ÷ Std. Wages/unit = 16930 ÷ 20 x 5 hours = 4240 hours Actual rate per labour hour : ` 16324/4240 ` 385 v The Amount of Production Overhead incurred Standard Production overhead (830 x 25) = ` 20750 Less: Favourable O.H. Variance : Expenditure ` 400 Volume ` 750 ` 1150 ` 19600 vi The Amount of Production overhead absorbed Units produced x standard overhead absorption rate = 830 x ` 25 = ` 20750
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342 vii Production Overhead Efficiency Variance (Standard Production overhead for actual hours worked standard production overhead for actual production) = (4240 hours x ` 5 830 units x ` 25 = ` 21200 - ` 20750 = ` 450(Adv) viii Selling Price Variance (Actual sales value realised Standard value of actual sales) = ( ` 59760(given) 830 units x ` 60 x 1.25 ÷ 1.00) (20% on sales price i.e. ` 255 on cost) = ( ` 59760 - ` 62250) = ` 2490 (Adv) ix Sales Volume Profit Variance (Standard Sales margin on actual sales Standard sales margin as per standard cost data) = (830 units x ` 15 800units x ` 15) = ` 12450 - ` 12000 = ` 450 (Fav) (Standard Sales Margin = ( ` 75 - ` 60) = ` 15 Illustration:9 Rush Ltd. has furnished you the following data: Budget Actual Dec.2011 No. of Working days 25 27 Production in Units 20000 22000 Fixed Overheads N 30000 N 31000 Budgeted fixed overhead rate is N1 per hour, In Dec. 2011, the actual hours worked were 31500. Calculate the following variances i) Efficiency Variance ii) Capacity Variance iii) Volume Variance iv) Expenditure Variance and v) Total Overhead Variance. Solution: Recovered Overhead = Budgeted Overhead/Budgeted Output X Actual Output = 30000/20000 X 22000 = 33000 Efficiency Variance = Standard Rate per hour X (Standard Hours for actual production - Actual Hours
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343 = N 1 X (33000 - 31500) = N 1500 (F) Capacity Variance = Standard Rate per Hour X (Actual Hours - Budgeted Hours) =N 1 X (31500 - 30000) = N 1500 (F) Volume Variance = Recovered Overhead - Budgeted Overhead = N 33000 - N 30000 = N 3000 (F) Expenditure Variance = Budgeted Overhead - Actual Overhead = N 30000 - N 31000 = N 1000 (A) Total Overhead Variance = Recovered Overhead - Actual Overhead = N 33000 - N 31000 = N 2000 (F) Verification: FOCV = FOExp.V + FOVV N 2000(F) = N 1000 (A) + N 3000(F) FOVV = FOEff.V + FOCap.V N 3000 (F) = N 1500 (F) + N 1500 (F) Illustration:10 RSV Ltd. has furnished you the following information for the month of August 2011. Budget Actual Output (Units) 30000 32500 Hours 30000 33000 Fixed Overhead N 45000 N 50000 Variable Overhead N 60000 N 68000 Calculate the Variances Solution: Standard Hour per Unit = Budgeted Hours/ Budgeted Units = 30000/30000 = 1 hour Total standard overhead rate per hour = Budgeted Overheads/Budgeted Hours = 105000/30000 = N 3.50 per hour Standard fixed overhead rate per hour = Budgeted fixed overhead/ Budgeted Hours
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344 = 45000/30000 = N 1.50 Standard Variable Overhead Rate per hour = Budgeted Variable Overheads / Budgeted Hours = 60000/30000 = N2 Overhead Cost Variance = Recovered Overheads - Actual Overheads Recovered Overheads = Standard Rate per Unit X Actual Output = 32,500 X N 3.50 = N 113,750 Total Overhead Cost Variance = N 113750 - N 118000 = N 4250 (A) Variable Overhead Cost Variance = (N2x32,500) - N 68000 = N 3000 (A) Fixed Overhead Cost Variance = N 48,750 - N 50000 = N 1250 (A) Expenditure Variance = Budgeted Overheads - Actual Overheads = N 45000 - N 50000 = N 5000 (A)
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