171.Crystal Company has an unfunded retiree health care plan. Each of the company's
four
employees has been with the organization since its inception at the beginning of
2012. As of the end of 2013, the actuary estimates the total net cost of providing
be
162.Carpenter Gems began the year with a net pension liability of $84 million
(underfunded pension
plan). Pension expense for the year included the following ($ in millions): service
cost, $30;
interest cost, $18; expected return on assets, $12; amortizat
computation is as follows: Variable Overhead Expenditure Variance =
Standard Variable Overheads for Standard Production Actual
Variable Overheads. C] Variable Overheads Effi ciency Variance: It
indicates the effi ciency by comparing between the output act
that indicates more number of working hours than budgeted. 4. Effi
ciency Variance: Standard Rate [Standard Quantity Actual Quantity]
Re.1 [1, 70, 100 1, 53, 090] = Rs.17, 010 [F] 5. Volume Variance:
Standard Rate [Budgeted Quantity Actual Quantity] Re.1
380 Material P = 20, 000/1000 X 450 = 9, 000 kg Material Q = 20,
000/1000 X 400 = 8, 000 kg Material R = 20, 000/1000 X 250 = 5, 000
kg 4. Material Mix Variance: Standard Cost of Standard Mix
Standard Cost of Actual Mix Rs.8, 36, 360 Rs.8, 10, 000 = Rs.2
Costing 372 IV] Fixed overhead volume variance V] Fixed overhead ef
ciency variance VI] Fixed overhead calendar variance Solution:
Standard variable overhead rate per unit = Budgeted variable
overheads/ budgeted number of units = Rs.12, 000/ 4, 000 units
Standards Actual Material A 2 kg @ Rs.2 per kg = Rs.4 Material A 8
kg @ Rs.3 per kg = Rs.24 Material B - 8 kg @ Rs.8 per kg = Rs.64
Material B 4 kg @ Rs.7 per kg = Rs.28 Material Cost Variance =
Standard Cost Actual Cost = Rs.68 Rs.52 = Rs.16[F] 2. The st
Fixed Overheads Volume Variance: This variance indicates the
under/over absorption of fi xed overheads due to the difference in the
budgeted quantity of production and actual quantity of production. If
the actual quantity produced is more than the budgete
material B @ Rs.5 per kg 500 kg of material C @ Rs.6 per kg During a
particular period, 100 tons of mixture X was produced from the usage
of 35 tons of material A @ Rs.9, 000 per ton 42 tons of material B @
Rs.6, 000 per ton 53 tons of material C @ Rs.7,
production is 20% of input. Due to shortage of material A, the
standard mix was changed and the actual mix was as follows:
Material A 105 kg at Rs.20 per kg Material B 95 kg at Rs.9 per kg
Actual loss was 35 kg, while the actual output was 165 kg Calculat
was possible due to the machine breakdown. 810 units of the product
was recorded as output of the gang during the month. Calculate
various labour variances. 363 Solution: The following table is
prepared to compute the variances. Category of Workers Standa
variance will be always adverse and will be computed as shown
below. Idle Time Variance = Abnormal Idle Time X Standard Rate. The
following chart will show the relationships between various labour
variances. Labour Cost Variance |
-| | | Rate Variance Eff
less than the standard rate. The labour rate variance is that portion of
direct labour cost variance, which is due to the difference between the
labour rates. III] Labour Effi ciency Variance: It is of paramount
importance that effi ciency of labour is me
due to this change or how much is the gain due to this change is
indicated by this variance. The computation is done with the help of
the following formula. Labour Mix Variance = Standard Cost of
Standard Mix Standard Cost of Actual Mix. V] Labour Yield V
Price Variance =Rs.60[F] Material Mix Variance Standard Cost of
Standard Mix Standard Cost of Actual Mix Rs.520 Rs.540 =
Rs.20[A] 369 4. Mixers Ltd. is engaged in producing a standard mix
using 60 kg of chemical X and 40 kg of chemical Y. The standard los
Actual Mix Note: Standard Cost of Standard Mix is computed as
shown below. 5. Material Yield Variance: Standard Yield Rate [Actual
Yield Standard Yield] 13. The standard material inputs required for
1, 000 kg of a fi nished output are given below. Materia
ciency Variance: Standard Rate [Standard Time Actual Time Worked]
Rs.6 [4160 # 3990] = Rs.1020 [F] IV] Labour Idle Time Variance:
Abnormal Idle Time X Standard Rate 210 hrs X Rs.6 = Rs.1260 [A] * As
shown in the table * As shown in the table # Standard ti
= Rs.1200 [A] Un-skilled: 1000 [Rs.8 Rs.10] = Rs.2000 [A] Total
Labour Rate Variance = Rs.3200 [A] III] Labour Effi ciency Variance:
Standard Rate [Standard Time Actual Time] C] Overhead Variances:
The overhead variances show the difference between the st
of a manufacturing unit using standard costing system. Particulars
Standard Actual Production 4, 000 3, 800 Working Days 20 21 Fixed
Overheads Rs.40, 000 Rs.39, 000 Variable Overheads Rs.12, 000 Rs.12,
000 Calculate, Variable Overhead Variance Fixed Overh
standard output of 10, 000 units. Standard price per kg of material
Rs.20 Actual quantity of material issued and used by production
department 10, 000 kg Actual price per kg of material Rs.21 per kg
Actual output 9, 00, 000 units Number of employees 200 S
1,70,100 = Rs. 17,010 [A] V] Fixed overhead cost variance: Variance I +
II + III + IV = Rs.2, 910 [A] 10. ABC Ltd. produces an article by blending
two basic raw materials. It operates a standard costing system and
the following standards have been set for
achieved arising due to the difference in the number of days worked
and budgeted. The formula for computation of this variance is as
follows. 365 Fixed Overheads Calendar Variance = Standard Rate
[Budgeted Quantity Revised Budgeted Quantity] II] Variable
Rs.53,600 Less: 10% Std. Loss 10 tons Less: Actual loss 18 tons
Standard Production 90 tons = Rs.26,000 182 tons = Rs.53, 600 I]
Material Price Variance - AQ [ SP AP] = Material A = 90[200-180]=
Rs.1,8 00 [F] Material B =110[300-340]= Rs.4,4 00[A] Total P
Overheads Rs.1, 50, 000 Rs.1, 56, 000 = Rs.6, 000 [A] 2. Calendar
Variance: Standard Rate [Revised Budgeted Quantity Budgeted
Quantity] Re.1 [1, 62, 000 1, 50, 000] = Rs.12, 000 [F] Note: Standard
Rate = 25 days X 6000 man hours per day X 1 unit per man h
Stock 35 kg @ Rs.4* = Rs.140.00 Purchases: 795 kg @ Rs.4.25 =
Rs.3,378.25 Total = Rs.3518.25 Material B: 60 kg X Rs.3 = Rs.180
Material B: Total Quantity Used = Opening Stock + Purchases Closing
Stock 40 + 1200 50 = 1190 kg Actual Cost Of Actual Quantity
standard fi xed overheads, it indicates the under absorption of fi xed
overheads and the variance is favourable. On the other hand, if the
actual overheads incurred are more than the standard fi xed
overheads, it indicates the over absorption of fi xed ov
The standard cost of this mix would be, A: 4500 kg Rs.10 per kg =
Rs.45, 000 377 B: 1500 kg Rs.50 per kg = Rs.75, 000 Total = Rs.1, 20,
000 Standard cost of actual mix is computed by multiplying the actual
quantity of A and B by the standard price per kg
Number of man hours 25, 000 27, 000 Cost and Management
Accounting Standard Costing 366 Solution: A] Fixed Overhead
Variances: I] Fixed Overhead Cost Variance: Standard Fixed Overheads
for Actual Production Actual Fixed Overheads = Rs.48, 000 Rs.49,
000 =
computed in the same manner as shown in the Note to the Cost
Variance B] Labour Variances: 1. Cost Variance: Standard Cost of
Labour [For actual production] Actual Labour Cost 9, 000 units Rs.40
50 days X 200 employees X Rs.45 Rs.3, 60, 000 Rs.4, 50, 000
Cost Variance: Standard Cost of Materials [For Actual Production]
Actual Cost. = Rs.1, 26, 000 Rs.1, 25, 000 = Rs.1 000 [F] Note:
Standard cost of materials for actual production is computed as
shown below. For 7200 kg the standard cost is Rs.1, 60, 000
were Rs.6.20, Rs.6 and Rs.5.70 respectively to 10, 30 and 60 of the
workers. Compute various relevant labour variances. Solution: The
following table is prepared for computation of various relevant labour
variances. Standard Actual Hours Actual Rate Rs. A