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Accounting
Yield Loss
Material
Losses
Based on their nature, Losses are classified into two:
Normal Loss
Those losses whose occurrence is inevitable i.e. which occur on account of normal reasons. Normal Loss is valued at its market price or the net realisable value.
Abnormal Loss
Those losses whose occurrence can be avoided i.e. which occur on account of abnormal reasons. Abnormal Loss is valued at cost or its full value.
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Loss of Mix
In dealing with losses in calculating material variances we deal with only loss of mix and not loss of individual materials.
Standard
[Production: ???]
Quantity Price Value/Cost Quantity Price Value/Cost (kgs) Rs/kg (Rs) (kgs) Rs/kg (Rs)
Material X Material Y 500 700 10 25 5,000 17,500 470 700 11 24 5,170 16,800
Standard Output and the Actual Output are not given. Assuming that the Output would be in the same terms as the input i.e. in kgs, The data relating to output can be ascertained as: Using, AO = AQ Mix - AL Mix AO = 1,170 kgs - 110 kgs = 1,060 kgs Using, SO = SQ Mix - SLMix SO = 1,200 kgs - 120 kg = 1,080 kg Where the data relating to the Standard Output and Actual Output are given, these calculations are not necessary.
Standard
[Production: 1,080 kg]
Actual
[Production: 1,060 kg]
Quantity Price Value/Cost Quantity Price Value/Cost (kgs) Rs/kg (Rs) (kgs) Rs/kg (Rs)
Material X Material Y 500 700 1,200 120 1,080 10 10 25 5,000 17,500 22,500 1,200 22,500 470 700 1,170 110 1,060 21,970 11 24 5,170 16,800 21,970
Net
Cost Data
The data relating to the realisable value of normal loss stock is to be ignored even if it is available (Rs. 1,200 for the standard). The Standard (Gross) Cost of the Mix is Rs. 22,500 and the Standard (Net) Cost of the Mix is Rs. 20,300 (Rs. 22,500 - Rs. 1,200).
SP(SO) =
SC Mix SQ Mix
You would be required to calculate the "Standard Price of Output" SP(SO), for which you need the "Standard Cost of Mix" SC Mix . The gross cost should be taken as the cost and not the net cost. To ensure that you do not consider improper data, understand that you need to ignore the data relating to realisable value of normal loss.
Standard
[Production: 2000 units]
Actual
[Production: 1800 units]
Quantity Price Value/Cost Quantity Price Value/Cost (kgs) Rs/kg (Rs) (kgs) Rs/kg (Rs)
Material X Material Y 500 700 1,200 120 10 10 25 5,000 17,500 22,500 1,200 22,500 470 700 1,170 110 11 24 5,170 16,800 21,970
Net
The data relating to losses is useful only for the purpose of ascertaining the standard or actual output as needed (if they are not given). If you are given the data relating to the final output (both Standard and Actual), you can ignore the data relating to losses. If you are not given the data relating to outputs, you should be given some relationship between the losses and the outputs so that you would be able to identify the outputs using the data.
SP(SO) =
SC Mix
SQ Mix
With regard to cost, you shoud consider the Standard (Gross) cost of the mix for calculating the SP(SO).
= ({
Note:
This formula can be used in all cases i.e. both when AQ Mix = SQ Mix as well as when AQ Mix ? SQ Mix . When AQ Mix ? SQ Mix , AQ Mix /SQ Mix works as an adjustment factor to readjust the Standard to Standard for Actual Input.
Standard
[Production: ??? (SO)]
Actual
[Production: ??? (AO)]
Quantity Price Value/Cost Quantity Price Value/Cost (kgs) Rs/kg (Rs) (kgs) Rs/kg (Rs)
Material X Material Y 1,500 1.000 2,500 250 1 10 25 15,000 25,000 40,000 250 500 2,250 3,400 2,400 1,500 3,900 11 24 26,400 36,000 62,400
Since the output data is not given, we calculate output from the given data. Using,
Using,
SP(SO) =
SC Mix SO
? SP(SO) =
? SP(SO) = Rs.
160 9
/kg
Using,
TMYV/TMSUV = ({
AQ Mix SQMix
SLMix} - AL Mix )
SP(SO)
TMYV/TMSUV = ({
160 9
/kg
160 9
/kg
160 9
/kg
Check:
MYV using the formula for output,
MYV = (AO - {
AQ Mix SQ Mix
SO}) SP(SO)
TMYV/TMSUV = (3,400 - {
2,250}) Rs.
160 9
/kg
160 9
/kg
160 9
/kg
Standard
[Production: ??? (SO)]
Actual
[Production: ??? (AO)]
Quantity Price Value/Cost Quantity Price Value/Cost (kgs) Rs/kg (Rs) (kgs) Rs/kg (Rs)
Material X Material Y 2,340 1.560 3,900 390 1 10 25 23,400 39,000 62,400 390 500 3,510 3,400 2,400 1,500 3,900 11 24 26,400 36,000 62,400
Since the output data is not given, we calculate output from the given data. Using,
SP(SO) =
SC Mix SO
? SP(SO) =
? SP(SO) = Rs.
160 9
/kg
Using,
/kg
160 9
/kg
Check:
MYV using the formula for output,
MYV = (AO - {
AQ Mix SQ Mix
SO}) SP(SO)
TMYV/TMSUV = (3,400 - {
2,250}) Rs.
160 9
/kg
160 9
/kg
160 9
/kg
Note:
This formula can be used only when AQ Mix = SQ Mix .
Check:
The same problem was solved in both the cases above. The only difference being that in the second case, the data was considered by recalculating the Standard for Actual Input to make AQ Mix = SQ Mix .
Alternative Formula
It is the difference between the Standard Cost of Standard Loss for Actual Output and the Standard Cost of Actual Loss Material yield variance = Standard Cost of Standard Loss for Actual Ouptut - Standard Cost of Actual Loss
MYV = SC of SL for AO - SC of AL
= ({
AO SO AO SO
= ({
Note:
This formula can be used in all cases i.e. both when AO = SO as well as when AO ? SO. When AO ? SO, AO/SO works as an adjustment factor to readjust the Standard to Standard for Actual Output. The above formula can be used in all cases i.e. both when AO = SO or when AO ? SO. When AO = SO the factor AO/SO will become 1 thus nullifing its effect. In such a case, both the formula would read
Standard
[Production: ??? (SO)]
Actual
[Production: ??? (AO)]
Quantity Price Value/Cost Quantity Price Value/Cost (kgs) Rs/kg (Rs) (kgs) Rs/kg (Rs)
Material X Material Y 1,500 1.000 2,500 250 1 10 25 15,000 25,000 40,000 250 500 2,250 3,400 2,400 1,500 3,900 11 24 26,400 36,000 62,400
SP Mix =
SC Mix SQMix
? SP Mix =
Using,
TMYV/TMSUV = ({
AO SO
TMYV/TMSUV = ({
= ({
= ({
) Rs. 16/kg
= ({
) Rs. 16/kg
Standard
[Production: ??? (SO)]
Actual
[Production: ??? (AO)]
Quantity Price Value/Cost Quantity Price Value/Cost (kgs) Rs/kg (Rs) (kgs) Rs/kg (Rs)
Material X Material Y 2,266.67 1,511.11 3,777.78 377.78 1 10 25 22,667 37,778 60,445 390 500 3,400 3,400 2,400 1,500 3,900 11 24 26,400 36,000 62,400
SP Mix =
SC Mix SQMix
? SP Mix =
Using,
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