A Study On Variance Analysis and Estimated Cost Sheet With Special Reference To Fluid Control Equipments at Chennai

SUMMER INTERNSHIP ON
“ A STUDY ON VARIANCE ANALYSIS AND

ESTIMATED COST SHEET
WITH SPECIAL REFERENCE TO FLUID CONTROL
EQUIPMENTS AT CHENNAI ”
Submitted in partial fulfilment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
By
“S.VIJAYA PRASHANTH”
“A31001917035”
MBA BATCH (2017-2019)
Under the Guidance of
Mrs.E.RADHIKA
Amity Global Business School
Chennai – 600086
CHENNAI – 600086
CERTIFICATE
This is to certify that the Summer Internship entitled “A STUDY ON VARIANCE

ANALYSIS AND ESTIMATED COST SHEET” submitted in partial fulfilment of the
requirements by “S.VIJAYA PRASHANTH” for the award of the Degree of MASTER OF
BUSINESS ADMINISTRATION in AMITY GLOBAL BUSINESS SCHOOL, CHENNAI,
is a record of original work carried out by him under my guidance and supervision. It is his
independent work and has not formed the basis for the award of any
Degree/Diploma/Associate ship/Fellowship or any other similar title.
Signature
Chennai – 600086 “Mrs.E.RADHIKA”

Date: FACULTY GUIDE
DECLARATION
I hereby declare that the Summer Internship entitled “A STUDY ON VARIANCE

ANALYSIS AND ESTIMATED COST SHEET” submitted by me in partial fulfilment of
the requirements for the award of the Degree of MASTER OF BUSINESS
ADMINISTRATION in AMITY GLOBAL BUSINESS SCHOOL, CHENNAI, is a record
of work done by me under the guidance and supervision of “Mrs.E.RADHIKA”, Amity
Global Business School, Chennai – 600086, and the Summer Internship has not previously
formed the basis for the award of any Degree/Diploma/Associateship/Fellowship or any other
similar title.
Signature
Chennai – 600086 S.VIJAYA PRASHANTH

Date: A31001917035
ACKNOWLEDGEMENT
I express my professional gratitude and sincere thanks to Director

Dr.E.Illamathian of Amity Global Business School, Chennai for providing
me the opportunity to undergo summer internship during the MBA 2017-2019
period.
My profound thanks to Dr. Vengadamani Muthukumar (Deputy Director)

and Mrs. E. Radhika (Project Guide), Amity Global Business School,
Chennai for guiding me throughout the project.
I would like to thank FULID CONTROL EQUIPMENTS for giving me the

opportunity to gain immense knowledge through internship in their
organization.
Last but not least, my profound thanks to my parents, friends and faculties who
gave their guidance and support in a way that helped me in bringing out my
project in a presentable manner.
S.VIJAYA PRASHANTH
(AGBS, CHENNAI)
MBA 2017-2019
INDEX
PAGE
NO CONTENT
NO
 INTRODUCTION
1  INDUSTRY PROFILE 1-17
 COMPANY PROFILE
 PRODUCT/SERVICE PROFILE
 REVIEW OF LITERATURE 18-19

2
 RESEARCH METHODOLOGY
 OBJECTIVE
3  NEED OF THE STUDY 20-25
 SCOPE OF THE STUDY
 LIMITIATION OF THE STUDY
 DATA ANALYSIS AND INFERENCE 26-90

4
 FINDINGS 91
5
 SUGGESTIONS AND RECOMMENDIATION 92

6
 CONCLUSIONS 93
7
 BIBLIOGRAPHY
8  ANNEXURE 94
TABLE OF DIAGRAMS
 MATERIAL VARIANCE FOR 14” 40

1
2  MATERIAL VARIANCE FOR 18” 50
 MATERIAL VARIANCE FOR 24” 63

3
 COMPARISON OF ACTUAL COST 64

4
 COMPARISON OF STANDARD COST 65

5
 COMPARISON OF VARIANCE 66
6
 COMPARISON OF MATERIAL VARIANCE

7 67
 COMPARISON OF LABOUR VARANCE

8 70
 COST SHEET FOR 14”

9 77
 COST SHEET FOR 18” 80
10
 COST SHEET FOR 24” 83

11
 COMPARISON OF PRIME COST 84

12
 COMPARISON OF FACTORY/WORK COST 85

13
 COMPARISON OF COST OF PRODUCTION 86

14
 COMPARISON OF COST OF SALES 87

15
 COMPARISON OF PROFIT 88
16
 COMPARISON OF SALES 89
17
 COMPARISON OF COST SHEETS 90

18
CHAPTER – I
INTRODUCTION
VARIANCE ANALYSIS:
Variance analysis the process of analysing and measuring the difference
between the actual production budget and expected production budget which
helps the management to rectify their mistakes and where they should improve
in their production process this helps them to improve the performance in their
business and also to develop their business in the production. It can be
calculated with both the cost and the revenues of the organization and it helps to
the management to keep control on its operational performance There are some
TYPES OF VARIANCE ANALYSIS
Variance Analysis can be broadly classified into the following heads:
 Material Variance
 Labour Variance
 Variable Overhead Variance
 Fixed Overhead Variance
 Sales Variance
1
MATERIAL VARIANCE
These arise from the difference between actual costs of materials used in
production and standard costs of materials specified for the goods produced.
This comes into play because of the difference in quantities consumed and
quantity initially allocated for production. This can also happen due to the
difference in price paid and price budgeted for materials used.
LABOUR VARIANCE
Labour Variance arises when there is a difference between the actual cost
associated with a labour activity from the standard cost.
A favourable labour rate variance suggests cost efficient employment of direct
labour by the organization.
 Reasons for a favourable labour rate variance may include:
 Hiring of more un-skilled or semi-skilled labour .This may adversely
impact labour efficiency variance
 Decrease in the overall wage rates in the market due to an increase in the
supply of labour which may be caused, for example, due to the influx of
immigrants because of the relaxation of immigration policy
 Inappropriately high setting of the standard cost of direct labour which
may, in the hindsight, be attributed to inaccurate planning.
2
An adverse labour rate variance indicates higher labour costs incurred during a
period compared with the standard.
 Causes for adverse labour rate variance may include:
 Increase in the national minimum wage rate
 Hiring of more skilled labour than anticipated in the standard (this should
be reflected in a favourable labour efficiency variance
 Inefficient hiring by the HR department
 Effective negotiations by labour unions
VARIABLE OVERHEAD VARIANCE
Variable Overhead Variance arises when there is a difference between the
actual variable overhead and the standard variable overhead based on budgets.
FIXED OVERHEAD VARIANCE
It arises when there is a difference between the standard fixed overhead for
actual output and the actual fixed overhead.
3
SALES VARIANCE
Sales Variance is the difference between the actual sales and budgeted sales of
an organization.
Thus, Variance Analysis is important to analyse the difference between the
actual and planned behaviour of an organization. If such analysis is not carried
out in regular intervals, it may cause a delay in the management action to
control its costs.
COST SHEET:
The cost sheet is the used to calculate the actual cost of the product
produced in an organization that includes:
 Raw materials
 Labour
 Overheads
CLASSIFICATION OF COST
Cost classification is the process of grouping costs according to their common
features. Costs are to be classified in such a manner that they are identified with
cost centre or cost unit.
ON THE BASIS OF BEHAVIOUR OF COST
Behaviour means change in cost due to change in output. On the basis of
behaviour cost is classified into the following categories:
4
FIXED COST
It is that portion of the total cost which remains constant irrespective of the
output up to capacity limit. It is called as a period cost as it is concerned with
period. It depends upon the passage of time. It is also referred to as non-
variable cost or stand by cost, capacity cost or “period” cost. It tends to be
unaffected by variations in output. These costs provide conditions for
production rather than costs of production. They are created by contractual
obligations and managerial decisions. Rent of premises, taxes and insurance,
staff salaries constitute fixed cost.
VARIABLE COST
This cost varies according to the output. In other words, it is a cost which
changes according to the changes in output. It tends to vary in direct proportion
to output. If the output is decreased, variable cost also will decrease. It is
concerned with output or product. Therefore, it is called as a “product” cost. If
the output is doubled, variable cost will also be doubled.
For example, direct material, direct labour, direct expenses and variable
overheads.
SEMI-VARIABLE COST
This is also referred to as semi-fixed or partly variable cost. It remains constant
up to ascertain level and registers change afterwards.
These costs vary in some degree with volume but not in direct or same
proportion. Such costs are fixed only in relation to specifiedconstant conditions.
For example, repairs and maintenance of machinery, telephone charges,
5
supervision professional tax, etc.
ON THE BASIS OF ELEMENTS OF COST
Elements means nature of items. A cost is composed of three elements,
material, labour and expenses. Each of these elements can be direct and indirect.
DIRECT COST
It is the cost which is directly chargeable to the product manufactured. It is
easily identifiable. Direct cost consists of three elements which are as follows:
DIRECT MATERIAL
It is the cost of basic raw material used for manufacturing a product. It becomes
a part of the product.
No finished product can be manufactured without basic raw materials. It is easil
y identifiable and chargeable to the product.
For example, leather in leatherwares, pulp in paper, steel
furniture, sugarcane for sugarcane etc. what is raw material for onemanufacturer
might be finished product for another.
Direct material includes the following:
1.All materials specially purchased for production or the process.
2.All components purchased for production or the process.
3.Material transferred from one cost centre to another or one process to another.
4.Primary packing materials, wrappings, cardboard boxes etc, necessary
for preservation or protection of product. Some of the items like nails or thread
in the store are a part of finished product. They are not treated as direct
materials in view of negligible cost.
6
DIRECT LABOUR OR DIRECT WAGES
It is the amount paid to those workers who are engaged in the manufacturing
line for conversion of raw materials into finished goods. The amount of wages
can be easily identified and directly charged to the product. These workers
directly handle raw materials, work in progress and finished goods on the
production line. Wages paid to the workers operating lathes, drilling, cutting
machines etc are direct wages.
Direct wages are also as productive labour, process labour or prime cost labour.
Direct wages include the payment made to the following group of workers:
1.Labour engaged on the capital production of the product.
2.Labour engaged in aiding the operations viz. Supervisor, Foreman, Shop
clerks and Worker on internal transport.
3.Inspectors, Analysts needed for such production.
DIRECT EXPENSES OR CHARGEABLE EXPENSES
It is the amount of expenses which is directly chargeable to the product
manufactured or which may be allocated to product directly. It can be easily
identified with the product. For example, hire charges of a special machine used
for manufacturing a product, cost of designing the product, cost of patterns,
architects’ fees/surveyors’ fees, or job cost of experimental work carried out
especially for a job etc. Cost of special drawings, cost of special layout designs,
patents, patterns, cost of models, surveyors’ fees, Excise duty, royalty on
production, cost of rectifying defective work. Utility of such expenses is
7
exhausted on completion of job.
INDIRECT COST
It is that portion of the total cost which cannot be identified and charged directly
to the product. It must be allocated and apportioned and absorbed over the units
manufactured on a suitable basis.
It consists of the following three elements:
INDIRECT MATERIAL
It is the cost of the material other than direct material which cannot be charged
to the product directly. It cannot be treated as a part of the product. It is also
known as expenses materials. It is the material which cannot be allocated to the
product, but which can be apportioned to the cost units. Examples are as
follows:
1.Lubricants, cotton waste, oil, grease, stationery etc
2.Small tools for general use
3.Some minor items such as thread in dress making, cost of nails in shoemaking
etc
INDIRECT LABOUR
It is the amount of wages paid to those workers who are not engaged on the
manufacturing line, for example, wages of workers in administration
department watch n ward department, sales department, general supervision.
INDIRECT EXPENSES
It is the amount of expenses which is not chargeable to the product directly. It is

the cost of giving service to the production department. it includes factory
expenses, administration expenses, selling and distribution expenses.
OVERHEADS OR SUPPLEMENTATY COST
8
Aggregate of indirect cost is referred to as overheads. It arises because of
overall operation of a business.
CLASSIFICATION OF OVERHEADS
Based on functions
Factory overheads It is the aggregate of all the factory expenses incurred in
connection with Manufacture of a product.
These are incurred in connection with running of factory. It includes the items
of expenses viz, factory salary, work managers salary, factory repairs, rent of
factory premises, factory lighting, lubricants, factory power, drawing office
salary, depreciation of plant and machinery unproductive wages, estimation
expenses, royalties, material handling charges, time office salaries, counting
house salaries etc.
ADMINISTRATIVE OR OFFICE OVERHEADS
It is the aggregate of all the expenses about administration. It is the cost of
office service or decision-making. It consists of the following expenses: Staff
salaries, printing and stationery, postage and telegram, telephone charges, rent
of office premises, office conveyance, printing and stationery and repairs and
depreciation of office premises and furniture etc.
SELLING & DISTRIBUTION OVERHEADS
It is the aggregate of all the expenses incurred in connection with sales and
distribution of finished product and services. It is the cost of sales and
distribution services. Selling expenses are such expenses which are incurred
acquiring and retaining customers.
9
It includes the following expenses:
a-Advertisement
b-Show room expenses
c-Traveling expenses
Fancy packing and demonstration. Distribution expenses include all those
expenses which are incurred in connection with making the goods available to
customers these expenses include the following (a)Packing charges (b) Loading
charges (c) Carriages on sales (d) Rent on warehouse (e)Insurance and lighting
of warehouse (f) Insurance of delivery van (g) Expense on delivery van (h)
Salaries of Godown keeper, drivers and packing staff.
Here we use these variance analysis and cost sheet to find out the actual cost
occurred to produce a product including the raw materials, labour and
chargeable expenses. It includes the both direct and indirect expenses of an
organization.
And we use variance analysis to find the actual cost than the expected cost to
improve the better performance of the production in an organization and to
predict those mistakes from the future.
10
INDUSTRY PROFILE
This industry is based on the engineering works which produces the filters press
which is a tool used in the separation of wastes from the waste used in the
industry and purifies it and it is recycled inside the industry to use it for other
purposes like use of water in the toilet and for other purposes.
This helps to reduce the usage of water and without polluting the atmosphere
where now the pollution is the huge problem and to save our environment this
helps the industry to run without affecting the surrounding and reduces the
usage of water by recycling.
This is the emerging industry which is recommended and supported to the
industries like which used for its production almost most of the industry uses
the water in different ways.
So, this builds the industry to be eco-friendly with the surroundings where water
is the important problem in India.
11
COMPANY PROFILE
Incorporated in the year 1984 at Chennai, Tamil Nadu, we “Fluid Control
Equipment’s” are a Sole Proprietorship (Individual) based company,
engaged as the manufacturer and exporter of Filter Press, Commercial Filter
Press, Tube Settler Tank and more. Our company ensures that these
products are timely deliver to our clients. We export approx. 5 % of our
products in Kenya, Morisuc, Zambia, Indonesia, Israel, Sri Lanka, Bhutan
and Bangladesh. Under the supervision of our mentor “Sangeeta
(Proprietor)” we have gained name and fame in the market.
FACTSHEET
Basic Information
Nature of Business Manufacturer
Exporter
Additional Business
Service Provider
Company CEO Sangeetha Subramaniam
Total Number of Employees Upto 10 People
Year of Establishment 1984
12
Legal Status of Firm Proprietorship Firm
Annual Turnover Rs. 50 Lakh - 1 Crore
Trade & Market
Export Percentage upto 20%
Statutory Profile
DGFT / IE Code 0499007042
GST No. 33BIYPS2127P1ZF
Packaging/Payment and Shipment Details
Payment Terms L/C
Online
DD
Payment Mode
Cheque
Cash
By Road
Shipment Mode By Cargo
By Sea
13
ABOUT CEO
Promoted initially as a partnership firm in 1975 by a group of ambitious
engineers, from mechanical and chemical engineering fields, the firm
specialized in manufacturing capital equipment’s for pharmaceutical, chemical
and food processing industries in the early days. It became a proprietary firm in
1984 under the able stewardship of one of the founders, Mr. K.S. Subramanian,
a mechanical engineer. Since then, the firm has focused and become a leader in
the manufacture and supply of filtration equipment’s and sludge handling
equipment’s.
14
PRODUCT PROFILE
Where here they produce filter press which is operated manually and fully
automatic and semi-automatic type they manufacture it three different sizes
14’’ , 18’’ and 24’’ as per the need of an customer and their industry.
Here there are some of the models in the products:
15
16
17
CHAPTER – II
REVIEW OF LITERATURE
Britannia is undoubtedly the number one retailer in India. It has built a very
emotional and cordial relationships with its customers which is very essential
for a successful business venture. The employees accept their responsibilities
wholeheartedly, accept that it is their responsibility to carry out a part of their
activities of Britannia company as they will be held accountable for the quality
of their work. As per the study, we would like to conclude that bread not being
the staple food in India, has evolved as a substitute for chapattis, rotis, rice, etc.
It is easily available due to its excellent distribution channels. Britannia bread
has acquired almost 50% stake in daily bread market. Today a variety of breads
are available, such as brown bread, whole wheat bread, chutney bread, etc. The
company is reaching out to all the sections of the society. Even after having
many competitors around, Britannia bread has managed to capture a large
market share not just in the urban but has also managed to penetrate the rural
markets.
This paper reports on the findings of a cost analysis exercise conducted on
projects of similar scope in various divisions within the energy utility. The
absence of a well-established effective system of monitoring and controlling
cost of projects has caused strong levels of dissatisfaction to the customers of

18
the energy utility. Customers receive similar product but too often different in
terms of cost comparison with various internal divisions of the same business
and this has resulted in customers having a different perspective about the
energy utility specifically when it comes to the management of funds. This
study was therefore carried out using electrical feeder bay projects of same
voltage capacity which are built to supply major customers of the business such
as mines and large industries which require high consumption of electricity.
Design Meetings with experts, one on one interview with some project team
members about how projects were being managed, these were the main methods
used to collect data used for this study and this had to include searching through
the repository system that the business is using to keep projects information.
The approach of the study was both quantitative and qualitative in nature thus it
drilled down into scope details and costs
It has been established that the three divisions are spending differently to
execute similar scope projects. The same 132kV Feeder Bay projects are having
strong cost variances when it comes to actual costs at the end of the project. The
business has different policies amongst divisions hence there are various
inconsistencies when it comes to the methods of project management. The
findings obtained in the study conducted will assist the business in
reconsidering the various policies and principles used in three divisions of the
business.
19
CHAPTER III
RESEARCH METHODOLOGY
Research means a scientific and systematic search for the pertinent information
on a specific topic. Research is a inquiry or a careful investigation through new
facts in any branch of knowledge. Research comprises defining and redefining
problems, collecting organizing, evaluating data, making deductions and
reacting conclusion.
Methodology is defined as the study of methods by which we gain knowledge,
it deals with cognitive processes imposed on research the problems arising from
the nature of its subject matter. It is essential to use a systematic research
methodology for the assessment of project because without the use of a research
methodology analysis of any company or organization will not be possible it is
worth a while to mention that I have the following type of published data.
Research design:
The research approach is used for the study is descriptive in nature. The
researcher selected analytical research as “research which is done on the basis
of facts or information of the company that are readily available and it is
analysed to provide findings”.

20
The form of study is on the variance analysis and cost sheet in general and
specific to the financial position.
Research design for the study:
The research design used is
 Analytical Research
In Analytical research design, the researcher has to use facts and

information already available and analyse. It is a research which depends on
critical thinking to discover facts about any given topic. Information obtained
through this research is then used to improve process
Period of study:
The study was undertaken for two months during the period of June and July on
FLUID CONTROL EQUIPMENTS, Chennai.
Area of study:
The study covers the analysis of Variance analysis and cost sheet in FLUID
CONTROL EQUIPMENTS.
Research instruments:
This study is based on the bill of materials ,credit note and accounting record
books of FLUID CONTROL EQUIPMENTS.
21
Sources of data:
The data or information obtained from
o Primary data
o Secondary data
Primary data:
The primary data are those which are collected freshly, which was collected for
the first time and from original.
Secondary data:
Secondary data are the data which are readily available, The use of data which
has already been discovered by others. The main source of information or data
where gathered from annual report and from internet.
This study is done on the period of 2015 to 2018 on FLUID CONTROL
EQUIPMENTS, from bill of materials and credit note which are
obtained through internet.
OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE: -
The primary objective of this is “study on preparation of cost sheet and
variance analysis of fluid control equipment’s”.
22
SECONDARY OBJECTIVES:
 To analyse the actual cost of the product manufactured
 To analyse where the cost can be reduced
 To provide suggestions and recommendations for effective and efficient
make of cost.
NEED OF STUDY: -
 It gives the breakup of total cost under different elements.
 It shows total cost as well as cost per unit.
 It helps in comparison with previous years.
 It facilities preparation of quotations
 It enables the management to fix up selling price.
 It controls cost.
 Variance analysis is used for efficient budgeting as the management
would like to lower the costs from the planned budgets.
 As the management is looking for lower costs it usually leads to make
detailed and forward-looking budgetary decisions.
 Variance analysis acts as a control mechanism. Analysis of large costs on
23
key items helps the company in knowing the causes and it helps the
management to investigate the possible ways of how such costs can be
avoided.
 It facilitates assigning responsibilities and engages control mechanism on
the departments. Like if labour variance and material variance is
unfavourable the management can enhance control of such departments
to increase its efficiency.
SCOPE OF THE STUDY

 It helps the organization to forecast about the future production of
the product
 It will also help to analyse the efficient use of raw materials, labour
and other expenses
 It helps to reduce the additional expenses paid by the organization
 To know the actual cost of the product produced includes all raw
materials, labour and other expenses.
24
LIMITATION OF THE STUDY
 The study was done by taking only by the historical data available in
organisation in the form of their credit note book and bill of materials and
the analysis has been done.
 The company were able to give valuable time only for a few days in a
month. Hence the required information could not be obtained.
 The period of study conducted is limited to 3 months.
 The management of the form is very conservative and was found
reluctant to provide the important information.
 This project report is based on the analysis of financial data which may
not be enough in some cases.
 Time will be a major constraint.
25
DATA ANALYSIS AND INFERENCE
Data analysis is the process of breaking a complex topic or substance into
smaller parts to gain a better understanding of it. Inference is the
process of drawing a conclusion by applying the observations. The
decision is called inference.
VARIANCE ANALYSIS
Variance analysis is the study of deviations of actual behaviour versus
forecasted or planned behaviour in budgeting or management accounting. This
is essentially concerned with how the difference of actual and planned
behaviours indicates how business performance is being impacted.
Variances may be classified under the below mentioned heads:
1. Material Variances: - These arise from the difference between actual costs of
materials used in production and standard costs of materials specified for the
goods produced. This comes into play because of the difference in quantities
consumed and quantity initially allocated for production. This can also happen
due to the difference in price paid and price budgeted for materials used.
2. Labour variances: - This denotes the actual wage paid to workers versus the
standard wage prevalent for the output specified. When the actual labour costs
26
are more than budgeted ones, the variance is unfavourable.
3. Overhead variances: - It may be defined as the sum total of indirect material,

labour and expense costs. Overhead variances may arise due to the difference
between standard overhead costs budgeted and the actual overheads incurred.
DIRECT MATERIAL PRICE VARIANCE:
= (Actual Quantity X Actual Price) – (Actual Quantity X

Standard Price)
= Actual Cost – Standard Price
 Actual Quantity is the quantity purchased during a period if the variance

is calculated at the time of material purchase
 Actual Quantity is the quantity consumed during a period if the variance
is calculated at the time of material consumption
Variance Analysis refers to the investigation as to the reasons for deviations in
the financial performance from the standards set by an organization in its
budget. It helps the management to keep a control on its operational
performance.
27
TYPES OF VARIANCE ANALYSIS
Variance Analysis can be broadly classified into the following heads:
 Material Variance
 Labour Variance
 Variable Overhead Variance
 Fixed Overhead Variance
 Sales Variance
MATERIAL VARIANCE
The difference between the standard cost of direct materials and the actual cost
of direct materials that an organization uses for production is known as Material
Variance.
LABOUR VARIANCE
A favourable labour rate variance suggests cost efficient employment of direct
labour by the organization.
 Reasons for a favourable labour rate variance may include:
 Hiring of more un-skilled or semi-skilled labour. This may adversely
impact labour efficiency variance
28
 Decrease in the overall wage rates in the market due to an increase in the
supply of labour which may be caused, for example, due to the influx of
immigrants because of the relaxation of immigration policy
 Inappropriately high setting of the standard cost of direct labour which
may, in the hindsight, be attributed to inaccurate planning
An adverse labour rate variance indicates higher labour costs incurred during a
period compared with the standard.
 Causes for adverse labour rate variance may include:
 Increase in the national minimum wage rate
 Hiring of more skilled labour than anticipated in the standard (this should
be reflected in a favourable labour efficiency variance
 Inefficient hiring by the HR department
 Effective negotiations by labour unions
VARIABLE OVERHEAD VARIANCE
Variable Overhead Variance arises when there is a difference between the
actual variable overhead and the standard variable overhead based on budgets.
29
FIXED OVERHEAD VARIANCE
It arises when there is a difference between the standard fixed overhead for
actual output and the actual fixed overhead.
SALES VARIANCE
Sales Variance is the difference between the actual sales and budgeted sales of
an organization.
Thus, Variance Analysis is important to analyse the difference between the
actual and planned behaviour of an organization. If such analysis is not carried
out in regular intervals, it may cause a delay in the management action to
control its costs.
MATERIAL VARIANCE
The difference between the standard cost of direct materials and the actual cost
of direct materials that an organization uses for production is known as Material
Variance.
= (Actual Quantity X Actual Price) – (Actual Quantity X

Standard Price)
= Actual Cost – Standard Price
30
14” FILTER PRESS
CALCULATION OF ACTUAL COST
Item Description Qty price
MS Pipe 1 337
Ramshaft 1 299.5
MS Lock Nut 1 54
Spring 1 150
Allen Bolt 1 11
U Seal 2 140
Elbow 1 39
Copper Washer 2 12
Hex Nipple 1 30
Bush 3 5
Handle 1 7
Bolt 1 10
Nut 1 10
Washer 1 10
MS Plate 1 628
MS Flat 2 157
MS Flat 4 298
MS Flat 1 157
MS Flat 2 51
31
Bush 2 49
Bolt 2 60
Bolt 3 90
Nut 3 90
GI Washer 6 180
Center Inlet 1 678.3
MS Plate 1 508.5
MS Flat 2 141
MS Flat 2 133
MS Flat 1 39
MS Flat 5 177.5
MS Flat 4 254
MS Rod 2 69
PP Roller 2 120
Cotter Pin 2 16
MS Plate 2 628
MS Flat 2 157
MS Flat 2 78
MS Flat 2 51
MS Flat 4 118
MS Flat 2 16
MS Shaft Nut 1 116.5
Bush 2 49
GI LOCK NUT 4 165.2
32
GI BOLT 3 90
MS Rod 1 246.4
MS Rod 3 103.5
MS Flange 1 76
MS Flat 2 589
LOCK NUT 8 330.4
Washer 4 165.2
PVC Sleeve 2 156
MS ROD 2 142
LOCK NUT 4 120
Washer 4 120
PVC Sleeve 2 90
Hydraulic Hand Pump 1 3500
Tee adaptor 1 420
copper washer 1 6
Pressure Hose 1 1200
Inlet Pipeline 1 450
Hydraulic Pressure line 1 650
Q Tube 1 350
ss coupling 1 35
TOTAL 14150
ACTUAL COST = RS.14,150
33
CALCULATION OF STANDARD COST
Item Description Qty price
MS Pipe 1 340
Ramshaft 1 310
MS Lock Nut 1 58
Spring 1 170
Allen Bolt 1 8
U Seal 2 150
Elbow 1 40
Copper Washer 2 8
Hex Nipple 1 50
Bush 3 7
Handle 1 15
Bolt 1 12
Nut 1 12
Washer 1 12
MS Plate 1 658
MS Flat 2 167
MS Flat 4 300
MS Flat 1 160
MS Flat 2 55
Bush 2 46
34
Bolt 2 65
Bolt 3 100
Nut 3 95
GI Washer 6 200
Center Inlet 1 720
MS Plate 1 550
MS Flat 2 147
MS Flat 2 138
MS Flat 1 36
MS Flat 5 180
MS Flat 4 234
MS Rod 2 65
PP Roller 2 150
Cotter Pin 2 12
MS Plate 2 658
MS Flat 2 167
MS Flat 2 77
MS Flat 2 58
MS Flat 4 118
MS Flat 2 15
MS Shaft Nut 1 125
Bush 2 42
GI LOCK NUT 4 160
GI BOLT 3 93
35
MS Rod 1 248
MS Rod 3 108
MS Flange 1 74
MS Flat 2 581
LOCK NUT 8 350
Washer 4 140
PVC Sleeve 2 170
MS ROD 2 150
LOCK NUT 4 150
Washer 4 110
PVC Sleeve 2 100
Hydraulic Hand Pump 1 3800
Tee adaptor 1 450
copper washer 1 10
Pressure Hose 1 1400
Inlet Pipeline 1 480
Hydraulic Pressureline 1 670
Q Tube 1 360
ss coupling 1 38
TOTAL 16267
STANDARD COST = RS.16,267
36
CALCULATION OF VARIANCE
Actual Standard
Item Description price price VARIANCE AMOUNT
MS Pipe 337 340 FAVOURABLE 3
Ramshaft 299.5 310 FAVOURABLE 10.5
MS Lock Nut 54 58 FAVOURABLE 4
Spring 150 170 FAVOURABLE 20
Allen Bolt 11 8 ADVERSE (3)
U Seal 140 150 FAVOURABLE 10
Elbow 39 40 FAVOURABLE 1
Copper Washer 12 8 ADVERSE (4)
Hex Nipple 30 50 FAVOURABLE 20
Bush 5 7 FAVOURABLE 2
Handle 7 15 FAVOURABLE 8
Bolt 10 12 FAVOURABLE 2
Nut 10 12 FAVOURABLE 12
Washer 10 12 FAVOURABLE 12
MS Plate 628 658 FAVOURABLE 30
MS Flat 157 167 FAVOURABLE 10
37
Bush 49 46 ADVERSE (3)
GI Washer 180 200 FAVOURABLE 20
Center Inlet 678.3 720 FAVOURABLE 41.7
MS Plate 508.5 550 FAVOURABLE 41.5
MS Flat 39 36 ADVERSE (3)
MS Flat 177.5 180 FAVOURABLE 2.5
MS Rod 69 65 ADVERSE (4)
PP Roller 120 150 FAVOURABLE 30
Cotter Pin 16 12 ADVERSE (4)
MS Shaft Nut 116.5 125 FAVOURABLE 8.5
Bush 49 42 ADVERSE (7)
38
GI LOCK NUT 165.2 160 ADVERSE (5.2)
GI BOLT 90 93 FAVOURABLE 3
MS Rod 246.4 248 FAVOURABLE 1.6
MS Rod 103.5 108 FAVOURABLE 4.5
MS Flange 76 74 ADVERSE (2)
LOCK NUT 330.4 350 FAVOURABLE 19.6
Washer 165.2 140 ADVERSE (25.2)
PVC Sleeve 156 170 FAVOURABLE 14
MS ROD 142 150 FAVOURABLE 8
LOCK NUT 120 150 FAVOURABLE 30
Washer 120 110 ADVERSE (10)
PVC Sleeve 90 100 FAVOURABLE 10
Hydraulic Hand
Pump 3500 3800 FAVOURABLE 300
Tee adaptor 420 450 FAVOURABLE 3
copper washer 6 10 FAVOURABLE 4
Pressure Hose 1200 1400 FAVOURABLE 200
Inlet Pipeline 450 480 FAVOURABLE 30
Hydraulic
Pressure line 650 670 FAVOURABLE 20
Q Tube 350 360 FAVOURABLE 10
ss coupling 35 38 FAVOURABLE 3
FAVOURABLE 911
39
MATERIAL VARIANCE FOR 14”
MATERIAL VARIANCE 14"
18000 16267
16000 14150
14000
12000
10000
8000
6000
4000
911
2000
0
1
ACTUAL COST STANDARD COST VARIANCE
Inference: -
The actual cost is lesser than the standard cost of Rs.2117 but there is
no big difference between them. The variance is of Rs.911
40
18” FILTER PRESS
Item Description Qty. price
MS Pipe 1 576
Ramshaft 1 53.25
MS Lock Nut 1 92
Spring 1 54
Allen Bolt 1 150
U Seal 1 11
Elbow 1 39
Copper Washer 2 15
Hex Nipple 1 30
Bush 3 5
Handle 1 7
Bolt 1 10
Nut 1 10
Washer 1 10
MS Plate 1 981
MS Flat 2 196
MS Flat 2 188
MS Plate 1 343.5
MS Flat 4 122
41
MS Flat 1 147
MS Flat 1 245.5
MS Pipe 2 317
MS Flat 1 46
Eye Bolts 2 60
Bolt 3 90
Nut 3 90
Washer 6 180
Center Inlet 1 976
MS Flange 4 80
MS Plate 1 867
MS Flat 2 184
MS Flat 2 530
MS Flat 1 88.5
MS Flat 2 88
MS Flat 3 115.5
MS Flat 2 38
MS Flat 2 55
MS Rod 4 134
PP Roller 4 120
Cotter Pin 4 16
MS Plate 2 1374
MS Flat 2 392
MS Flat 2 275
42
MS Flat 4 282
MS Flat 4 330
MS Flat 1 25.5
MS Pipe 1 317
MS Flat 1 147
MS Flat 1 245.5
Actuator Shaft 1 1100.5
Eye Bolts 2 60
Bolt 3 90
TOTAL 16267
ACTUAL COST =RS.12,440
43
MS Pipe 1 560
Ramshaft 1 52
MS Lock Nut 1 95
Spring 1 59
Allen Bolt 1 160
U Seal 1 18
Elbow 1 35
Copper Washer 2 19
Hex Nipple 1 38
Bush 3 9
Handle 1 8
Bolt 1 15
Nut 1 15
Washer 1 15
MS Plate 1 971
MS Flat 2 198
MS Flat 2 198
MS Plate 1 345
MS Flat 4 130
MS Flat 1 140
44
MS Flat 1 245
MS Pipe 2 320
MS Flat 1 50
Eye Bolts 2 70
Bolt 3 100
Nut 3 100
Washer 6 160
Center Inlet 1 996
MS Flange 4 85
MS Plate 1 847
MS Flat 2 164
MS Flat 2 550
MS Flat 1 120
MS Flat 2 120
MS Flat 3 125
MS Flat 2 45
MS Flat 2 58
MS Rod 4 124
PP Roller 4 110
Cotter Pin 4 19
MS Plate 2 1274
MS Flat 2 392
MS Flat 2 285
MS Flat 4 282
45
MS Flat 4 335
MS Flat 1 28
MS Pipe 1 337
MS Flat 1 157
MS Flat 1 250
Actuator Shaft 1 1200
Eye Bolts 2 70
Bolt 3 120
TOTAL 12828
46
Actual Standard
MS Pipe 576 560 ADVERSE (16)
Ramshaft 53.25 52 ADVERSE (1.25)
Allen Bolt 150 160 FAVOURABLE 10
Elbow 39 35 ADVERSE (4)
Copper Washer 15 19 FAVOURABLE 4
Bush 5 9 FAVOURABLE 4
MS Plate 981 971 ADVERSE (10)
47
MS Flat 245.5 245 ADVERSE (0.5)
Eye Bolts 60 70 FAVOURABLE 10
Washer 180 160 ADVERSE (20)
Center Inlet 976 996 FAVOURABLE 20
MS Flange 80 85 FAVOURABLE 5
MS Rod 134 124 ADVERSE (10)
PP Roller 120 110 ADVERSE (10)
Cotter Pin 16 19 FAVOURABLE 3
48
Actuator Shaft 1100.5 1200 FAVOURABLE 99.5
Eye Bolts 60 70 FAVOURABLE 10
FAVOURABLE 279.25
49
14000 12828
12440
12000
10000
8000
6000
4000
2000
279.5
0
1
Inference: -
The actual cost is lesser than the standard cost of Rs.388 but there is
no big difference between them. The variance is of Rs.279.5
50
24” FILTER PRESS
MS Pipe 1 607
Ramshaft 1 932
MS Lock Nut 1 97
Spring 1 65
Allen Bolt 1 150
U Seal 2 75
MS Elbow 1 45
Copper Washer 2 30
Hex Nipple 1 30
Bush 3 16.5
Handle 1 15
Bolt 1 10
Nut 1 10
Washer 1 10
MS Plate 1 1735
MS Flat 2 554
MS Flat 2 1020
MS Flat 2 495
MS Flat 6 471
51
MS Plate 1 400.5
MS Flat 1 267
MS Flat 1 64
MS Pipe 2 320
Bolt (Structure) 3 30
Bolt (Parallel Bar) 4 80
Washer (Structure) 6 30
Washer (Parallel Bar) 8 40
Washer (Tie Rod) 4 40
Nut (Structure) 3 30
Nut (Parallel Bar) 4 20
Nut (Tie Rod) 4 40
Eye Bolt 2 30
SS Pipe 4 420
SS Pipe 4 360
MS Flange 4 120
MS Plate 1 1558
MS Plate 1 190
MS Flat 2 495
MS Flat 2 479
MS Flat 3 388.5
MS Flat 3 354
MS Flat 2 112
MS Flat 4 318
52
MS Flat 4 672
MS Flat 2 47
Ms Rod 2 65
Bolt 4 40
PP Roller 4 120
Cotter Pin 2 20
MS Plate 1 667
MS Plate 1 451.5
MS Flat 2 534
MS Flat 2 361
MS Flat 2 110
MS Flat 4 252
MS Flat 4 70
MS Flat 4 142
MS Pipe 1 236
MS Flat 1 267
MS Plate 1 400.5
MS Pipe 2 70
MS Flat 1 64
MS Flange 1 40
Bolt (Hydraulic jack) 4 40
Bolt (Jack Assembly) 8 80
53
Washer (Jack Assembly) 8 80
Nut (Tie Rod) 4 40
Eye Bolt 2 20
Ms Rod 1 1774.5
MS Plate 1 4906
Ms Rod 3 295.5
TOTAL 24708.5
ACTUAL COST =RS.24,708.5
54
MS Pipe 1 620
Ramshaft 1 900
MS Lock Nut 1 90
Spring 1 75
Allen Bolt 1 130
U Seal 2 70
MS Elbow 1 42
Copper Washer 2 30
Hex Nipple 1 45
Bush 3 25
Handle 1 20
Bolt 1 20
Nut 1 20
Washer 1 20
MS Plate 1 1700
MS Flat 2 550
MS Flat 2 1050
MS Flat 2 500
MS Flat 6 490
MS Plate 1 420
55
MS Flat 1 270
MS Flat 1 75
MS Pipe 2 350
Nut (Tie Rod) 4 50
Eye Bolt 2 45
SS Pipe 4 440
SS Pipe 4 380
MS Flange 4 100
MS Plate 1 1550
MS Plate 1 200
MS Flat 2 500
MS Flat 2 500
MS Flat 3 410
MS Flat 3 365
MS Flat 2 125
MS Flat 4 340
MS Flat 4 720
56
MS Flat 2 50
Ms Rod 2 70
Bolt 4 50
PP Roller 4 125
Cotter Pin 2 40
MS Plate 1 680
MS Plate 1 470
MS Flat 2 540
MS Flat 2 370
MS Flat 2 130
MS Flat 4 275
MS Flat 4 80
MS Flat 4 150
MS Pipe 1 250
MS Flat 1 275
MS Plate 1 420
MS Pipe 2 80
MS Flat 1 75
MS Flange 1 50
Bolt (Hydraulic jack) 4 50
Bolt (Jack Assembly) 8 95
57
Washer (Jack Assembly) 8 100
Nut (Tie Rod) 4 50
Eye Bolt 2 35
Ms Rod 1 1900
MS Plate 1 5000
Ms Rod 3 310
TOTAL 25658
58
Actual Standard
Ramshaft 932 900 ADVERSE (32)
Allen Bolt 150 130 FAVOURABLE 20
MS Elbow 45 42 ADVERSE (3)
Copper Washer 30 30 FAVOURABLE 0
Bush 16.5 25 FAVOURABLE 8.5
59
Bolt (Structure) 30 40 FAVOURABLE 10
Bolt (Parallel Bar) 80 90 FAVOURABLE 10
Washer (Structure) 30 26 ADVERSE (4)
Washer (Parallel Bar) 40 50 ADVERSE (10)
Washer (Tie Rod) 40 50 FAVOURABLE 10
Nut (Structure) 30 45 FAVOURABLE 15
Nut (Parallel Bar) 20 30 FAVOURABLE 10
Nut (Tie Rod) 40 50 FAVOURABLE 10
Eye Bolt 30 45 FAVOURABLE 15
SS Pipe 420 440 FAVOURABLE 20
SS Pipe 360 380 FAVOURABLE 20
MS Flange 120 100 ADVERSE (20)
60
Ms Rod 65 70 FAVOURABLE 5
PP Roller 120 125 FAVOURABLE 5
Cotter Pin 20 40 FAVOURABLE 20
MS Flange 40 50 FAVOURABLE 10
Bolt (Structure) 30 45 FAVOURABLE 15
Bolt (Parallel Bar) 40 50 FAVOURABLE 10
Bolt (Hydraulic jack) 40 50 FAVOURABLE 10
Bolt (Jack Assembly) 80 95 FAVOURABLE 15
Washer (Structure) 30 45 FAVOURABLE 15
61
Washer (Parallel Bar) 80 90 FAVOURABLE 10
Washer (Tie Rod) 40 50 FAVOURABLE 10
Washer (Jack Assembly) 80 100 FAVOURABLE 20
Nut (Structure) 30 40 FAVOURABLE 10
Nut (Parallel Bar) 40 50 FAVOURABLE 10
Nut (Tie Rod) 40 50 FAVOURABLE 10
Eye Bolt 20 35 FAVOURABLE 15
Ms Rod 1774.5 1900 FAVOURABLE 125.5
Ms Rod 295.5 310 FAVOURABLE 14.5
FAVOURABLE 1013.5
62
30000
25658
24708.5
25000
20000
15000
10000
5000
1013.5
0
1
Inference: -
The actual cost is lesser than the standard cost of Rs.949.5 but there
is no big difference between them. The variance is of Rs.1013.5
63
COMPARISON OF ACTUAL COST
30000
25000
24708.5
20000
14"
15000
18"
14150
24"
12440
10000
5000
0
ACTUAL COST
Inference: -
When comparing the actual costs, the 18” filter press has the lesser
actual costs its suggested to produce more 18” filter presses
64
COMPARISON OF STANDARD COST
30000
25658
25000
20000
14" 16267
18"
24" 15000 12828
10000
5000
0
STANDARD COST
Inference: -
When comparing the standard costs, the 18” filter press has the lesser
standard costs its suggested to produce more 18” filter presses
65
COMPARISON OF VARIANCE
1200
1013.5
1000 911
800
14"
18"
24" 600
400
279.5
200
0
VARIANCE
Inference: -
When comparing the variances, the 18” filter press has the lesser
variance its suggested to produce more 18” filter presses
66
COMPARISON OF MATERIAL VARIANCE
MATERIAL VARIANCE
30000
25000
20000
15000
10000
5000
0
14" 18" 24"
ACTUAL COST 14150 12440 24708.5
STANDARD COST 16267 12828 25658
VARIANCE 911 279.5 1013.5
Inference: -
When comparing the actual costs and standard costs and variances
the 18” filter press has the lesser between three of them its suggested to produce
more 18” filter presses
67
DIRECT LABOUR VARIANCE:
Actual Hours x Actual Actual Hours x Standard

= -
Rate Rate
= Actual Cost - Standard Cost of Actual Hours
14” FILTER PRESS
= 35 X 1225 – 35 X 1375
= 42875 – 48125
= 5250 (FAVOURABLE)
68
18” FILTER PRESS
= 60 X 1225 – 60 X 1375
= 73500 – 82500
= 9000 (FAVOURABLE)
24” FILTER PRESS
= 120 X 1225 – 120 X 1375
= 147000 – 165000
= 18000 (FAVOURABLE)
69
COMPARISON OF LABOUR VARIANCE
LABOUR VARIANCE
18000
18000
16000
14000
12000
14
9000
10000 18
24
8000
5250
6000
4000
2000
0
1
Inference: -
When comparing the labour variances, the labour efficiency depends
upon the size of the filter press because of the time constraint.
70
COST SHEET
A document that reflects the cost of the items and services required by a project
or department for the performance of its business purposes. For example, a
departmental cost sheet might include the material costs, labour costs and
overhead costs incurred over a given time frame by a department and it
therefore, provides a record of costs that are chargeable to that department.
There are four basic types of cost that accountants direct, indirect,
fixed, and variable costs. They are defined as follows:
 Direct costs: Direct costs can be directly traced to the
product. Material and labour costs are good examples.
 Indirect costs: These can’t be directly traced to the product;
instead, these costs are allocated, based on some level of
activity. For example, overhead costs are considered indirect
costs.
 Fixed costs: Fixed costs don’t vary with the level of
production. A good example is a lease on a building.
71
 Variable costs: Unlike fixed costs, variable costs change with
the level of production. For example, material used in
production is a variable cost.
Every cost can be defined with two of these four costs. For example, the cost to
repair machinery is an indirect variable cost. You decide if the cost is direct or
indirect, and if the cost is fixed or variable. For determination of total cost of
production, a statement showing the various elements of cost is prepared. This
statement is called as a statement of cost or
cost sheet
Cost sheet is a statement which provides assembly of the detailed cost of a cost
centre or a cost unit. It is a statement showing the details of a) total cost of job
b) Cost of an operation or order. It brings out the composition of total cost in a
logical order under proper classifications & sub-divisions. The period is covered
by the cost sheet may be by a week a month or so. Separate columns are
provided to show total cost, cost per-unit etc. In case of different products there
are different cost sheets for different products. A cost sheet is prepared under
output or unit costing method.
PURPOSE OF COST SHEET
It gives the breakup of total cost under different elements.
It shows total cost as well as cost per unit.
It helps in comparison with previous years.
It facilities preparation of tenders or quotations.
72
It enables the management to fix up selling price.
It controls cost.
DIVISIONS OF COST
PRIME COST
It comprises of all direct materials, direct labour and direct expenses.
It is also known as flat cost
Prime cost = Direct Materials + Direct Labour + Direct Expenses
WORKS COST
It is also known as a factory cost or cost of manufacture. It is the cost
of manufacturing an article. It includes prime cost and factory
expenses.
Works Cost = Prime Cost + Factory Overheads
COST OF PRODUCTION
It represents factory cost plus administrative expenses.
Cost of Production = Factory Cost + Administrative Expenses
73
TOTAL COST
It represents cost of production plus selling and distribution expenses.
Total Cost= Cost of Production + Selling & Distribution Expenses
SELLING PRICE
It is the price which includes total cost-plus margin of profit or minus

loss, if any.
Selling Price = Total Cost + Profit (-Loss)
74
COST SHEET FOR 14”
PARTICLULARS AMOUNT AMOUNT

DIRECT COST
Raw materials consumed
opening stock of raw materials 0
Purchase of raw materials 14150
(-) closing stock of raw
materials 0
Materials consumed` 14150
Direct labour/wages 42875
Direct cost expenses 0
PRIME COST 57025
Factory/works overheads
Indirect labour 417
Depreciation on machinery 0
Other factory expenses 487
Supervisors salary 0
FACTORY/WORK COST 904
Office/administration
75
overheads
Office rent 0
Staff salary 0
Office/general expenses 167
Telephone charges 83
Electricity and lightings 237
Printing and stationary 83
COST OF PRODUCTION 570
Selling distribution overheads
sales commission 0
salesman salary 0
sales expenses 0
COST OF SALES 58499
PROFIT 6501
SALES 65000
76
COST SHEET FOR 14"
70000
65000
58499
60000 57025
50000
PRIME COST
FACTORY COST
40000
COST OF PRODUCTION
COST OF SALES
30000 PROFIT
SALES
20000
10000 6501
904 570
0
1
Inference: -
When comparing the comparing the cost of sales and the sales the
profit of the filter press in Rs.6501 where there is no huge profit because of the
cost of the raw materials.
77

DIRECT COST
Purchase of raw materials 16267
materials 0
Materials consumed` 16267
PRIME COST 89767
Indirect labour 625
78
overheads
Office rent 0
Staff salary 0
sales commission 0
salesman salary 0
sales expenses 0
COST OF SALES 91977
PROFIT 8023
SALES 100000
79
COST SHEET FOR 18"
100000
100000
91977
89767
90000
80000
70000
PRIME COST
60000 FACTORY COST

COST OF PRODUCTION
50000 COST OF SALES
PROFIT
40000 SALES
30000
20000
8023
10000
1355 855
0
1
Inference: -
profit of the filter press in Rs.8023 where there is no huge profit because of the
cost of the raw materials.
80

DIRECT COST
Purchase of raw materials 24708.5
materials 0
Materials consumed` 24708.5
PRIME COST 171708.5
Indirect labour 1250
81
overheads
Office rent 0
Staff salary 0
sales commission 0
salesman salary 0
sales expenses 0
COST OF SALES 176128.5
PROFIT 23871.5
SALES 200000
82
COST SHEET FOR 24"
200000
200000
176128.5
180000 171708.5
160000
140000
prime cost
120000 factory cost
cost of production
100000 cost of sales
profit
80000 sales
60000
40000
23871.5
20000
2710 1710
0
1
Inference: -
profit of the filter press is Rs.23871.5 where there is a decent profit because of
the price of sales.
83
COMPARISON OF PRIME COST
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
PRIME COST
14" 57025
18" 89767
24" 171708.5
Inference: -
When comparing the prime cost of the filter press the
price of the raw materials varies as per the size of the product.
84
COMPARISON OF FACTORY COST
3000
2500
2000
1500
1000
500
0
FACTORY COST
14" 904
18" 1355
24" 2710
Inference: -
When comparing the factory cost of the filter press the
price varies as per the size of the product.
85
COMPARISON OF COST OF PRODUCTION
1800
1600
1400
1200
1000
800
600
400
200
0
COST OF PRODUCTION
14" 570
18" 855
24" 1710
Inference: -
When comparing the cost of production of the filter
press the cost of production varies as per the size of the product.
86
COMPARISON OF COST OF SALES
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
COST OF SALES
14" 58499
18" 91977
24" 176128.5
Inference: -
When comparing the cost of sales of the filter press
the cost of sales varies as per the size of the product and also because of the raw
materials included.
87
COMPARISON OF PROFIT
25000
20000
15000
10000
5000
0
PROFIT
14" 6501
18" 8023
24" 23871.5
Inference: -
When comparing the profits of the filter press the
profit of the 24” filter press has a higher profit.
88
COMPARISON OF SALES
200000
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
SALES
14" 65000
18" 100000
24" 200000
Inference: -
When comparing the sales of the filter press the price varies as per
the sizes of the filter presses.
89
COMPARISON OF COST SHEETS
200000
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
14" 18" 24"
PRIME COST 57025 89767 171708.5
FACTORY COST 904 1355 2710
COST OF PRODUCTION 570 855 1710
COST OF SALES 58499 91977 176128.5
PROFIT 6501 8023 23871.5
SALES 65000 100000 200000
Inference: -
When comparing the cost sheets of the filter presses its suggested to
produce more 18” filter press as the cost of production less and also has a good
profit compare to others.
90
FINDINGS: -
 As per the analysis there is no big difference between both the
actual cost and standard cost for all three types of filter press.
 we found that the actual cost and the standard cost of the 18”
filter press is lesser when comparing it with 14” & 24”.
 Likewise, when comparing the variance 18” has the lesser
variance. Both 14” & 24” does not have huge difference in the
variance.
 And lack of man power in the production department so it
clearly shows a big difference in the labour variance between
the three filter presses.
 When comparing the cost sheets 24” gives more profit than the
14” & 18” where we don’t find a big difference between the
both.
 The raw material consumes a bigger part in the prime cost than
other direct expenses.
91
SUGGESTION: -
 As we analyse we found that the actual and standard cost is less
in 18” and also the same in the labour variance.
 We suggest them to sell more 18” filter presses than the other as
it also gives a decent amount of profit
 Suggest them to reduce the import of raw materials
 Manufacturing of the important materials in their own will help
to reduce the cost of raw material
 Or they should try to get the raw materials for cheaper price
 And to recruit more employees in the production department to
improve their business.
 Needs more promotion to enhance the business.
92
CONCLUSION: -
 To understand the current cost of materials and labour and also to know
the actual cost of each product.
 It helps the organisation to improve their business and in pricing the

product.
 This helps them to know where the management should improve and to
be efficient.
 As per the analysis we found that the actual cost and the standard cost of
the filters does not have much difference in the price.
 But the actual and the standard cost of the 18” filter press is lesser than
the others.
 The labour variance changes as per the time taken to produce a particular
filter press as per the sizes.
 When comparing both the material and labour variance we found that the
18” filter press is better than the rest in terms of profit and also the cost
incurred for it.
 The management should look at the raw materials as they consume more
amount in the prime cost the factory cost and rest vary as per their sizes.
93
BIBILOGRAPHY: -
 http://www.flu-con.com/
 https://www.google.com/
 https://www.scribd.com/
BOOKS OF REFERENCES:
 Cost accounting by REDDY and MURTHY
 Cost accounting by M P GUPTHA
94

A Study On Variance Analysis and Estimated Cost Sheet With Special Reference To Fluid Control Equipments at Chennai

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

A Study On Variance Analysis and Estimated Cost Sheet With Special Reference To Fluid Control Equipments at Chennai

Uploaded by

Copyright:

Available Formats

SUMMER INTERNSHIP ON

“ A STUDY ON VARIANCE ANALYSIS AND

MASTER OF BUSINESS ADMINISTRATION

Under the Guidance of

This is to certify that the Summer Internship entitled “A STUDY ON VARIANCE

Chennai – 600086 “Mrs.E.RADHIKA”

I hereby declare that the Summer Internship entitled “A STUDY ON VARIANCE

Chennai – 600086 S.VIJAYA PRASHANTH

I express my professional gratitude and sincere thanks to Director

My profound thanks to Dr. Vengadamani Muthukumar (Deputy Director)

I would like to thank FULID CONTROL EQUIPMENTS for giving me the

 REVIEW OF LITERATURE 18-19

 DATA ANALYSIS AND INFERENCE 26-90

 SUGGESTIONS AND RECOMMENDIATION 92

 MATERIAL VARIANCE FOR 14” 40

2  MATERIAL VARIANCE FOR 18” 50

 MATERIAL VARIANCE FOR 24” 63

 COMPARISON OF ACTUAL COST 64

 COMPARISON OF STANDARD COST 65

 COMPARISON OF MATERIAL VARIANCE

 COMPARISON OF LABOUR VARANCE

 COST SHEET FOR 14”

 COST SHEET FOR 24” 83

 COMPARISON OF PRIME COST 84

 COMPARISON OF FACTORY/WORK COST 85

 COMPARISON OF COST OF PRODUCTION 86

 COMPARISON OF COST OF SALES 87

 COMPARISON OF COST SHEETS 90

business and also to develop their business in the production. It can be

TYPES OF VARIANCE ANALYSIS

Variance Analysis can be broadly classified into the following heads:

 Variable Overhead Variance

 Fixed Overhead Variance

difference in price paid and price budgeted for materials used.

associated with a labour activity from the standard cost.

A favourable labour rate variance suggests cost efficient employment of direct

labour by the organization.

 Reasons for a favourable labour rate variance may include:

 Hiring of more un-skilled or semi-skilled labour .This may adversely

impact labour efficiency variance

immigrants because of the relaxation of immigration policy

 Inappropriately high setting of the standard cost of direct labour which

may, in the hindsight, be attributed to inaccurate planning.

period compared with the standard.

 Causes for adverse labour rate variance may include:

 Increase in the national minimum wage rate

be reflected in a favourable labour efficiency variance

 Inefficient hiring by the HR department

 Effective negotiations by labour unions

VARIABLE OVERHEAD VARIANCE

Variable Overhead Variance arises when there is a difference between the

FIXED OVERHEAD VARIANCE

actual output and the actual fixed overhead.

Thus, Variance Analysis is important to analyse the difference between the

actual and planned behaviour of an organization. If such analysis is not carried

out in regular intervals, it may cause a delay in the management action to

control its costs.

produced in an organization that includes:

Cost classification is the process of grouping costs according to their common

cost centre or cost unit.

ON THE BASIS OF BEHAVIOUR OF COST

Behaviour means change in cost due to change in output. On the basis of