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5 Strategic management Accounting
Unit ± I Marginal costing
Course Instructors: Mrs. Annie Kavitha & Mr. N. Ramesh Babu Name of the student:
1. 2. 3. 4. 5. 6. Introduction Cost classification (Behaviour wise Fixed & Variable) Variable costing VS. Absorption costing Basic problems on Marginal costing Managerial application of Marginal costing (Advanced problems) Case Study
Marginal costing equation: Sales ± variable cost = contribution = Fixed cost - profit
1. Profit/ volume ratio = Contribution x 100 Sales 2. Breakeven point (in units) = Fixed cost Contribution margin per unit 3. Breakeven sales = Fixed cost P/V ratio 4. Desired sales (in units) = Fixed cost + profit Contribution margin per unit 5. Desired sales (in Rupees) = Fixed cost + profit P/V ratio 6. Margin of safety = Profit P/V ratio OR Margin of safety = Actual sales ± Breakeven sales 7. P/V ratio = % change in profit % change in sales
BASIC PROBLEMS 1. Calculate the P/V ratio and Breakeven point from the following particulars: Rs. Sales 5,00,000 Fixed cost 1,00,000 Profit 1,50,000 Ans: P/V ratio = 50%; BEP = 2,00,000 2. Calculate Breakeven point from the following particulars: (HW) Rs. Fixed expenses 1,50,000 Variable cost per unit 10 Selling price per unit 15 Ans: BEP ± 30,000 units & Rs. 4,50,000 3. From the following information find out the amount of profit earned during the year using the marginal costing technique: (HW) Fixed cost Rs.5,00,000 Variable cost Rs. 10 per unit Selling price Rs. 15 per unit Output level 1,50,000 units Ans: profit ± Rs. 2,50,000 Calculate Breakeven point (HW) Selling price Rs.50/ unit Variable cost Rs. 30/ unit Fixed cost Rs. 2,000 Ans: BEP ± 100 units & Rs. 5,000 The statement of cost of a cycle is as follows: Rs. Material 200 Labour 100 Variable expenses 25 Fixed expenses 75 Profit 125 Selling price 525 The number of cycles made and sold are 10,000 units. Find out: (i) Breakeven point (ii) how many cycles must be produced and sold if the selling price is reduced by Rs. 25 and the same profit is maintained? Ans: (i) 3,750 units (ii) 11,428 units From the following particulars, calculate: (HW) (i) Breakeven point in terms of sales value and in units. (ii) Number of units that must be sold to earn a profit of Rs. 90,000. Fixed Factory overhead cost Rs. 60,000 Fixed selling overhead cost Rs. 12,000 Variable Manufacturing cost per unit Rs. 12 Variable Selling cost per unit Rs. 3 Selling price per unit Rs. 24 Ans: BEP ± 8,000 units & Rs.1,92,000; Desired sales ± 18,000 units From the following data, you are required to calculate: (HW) (a) P/V ratio (b) Breakeven sales (c) Sales required to earn a profit of Rs. 4,50,000 Fixed expenses Rs. 90,000 Variable cost per unit: 2
Direct material Rs. 5 Direct labour Rs. 2 Direct expenses 100% of direct labour Selling price per unit Rs. 12 Ans: P/V ratio ± 25%; BES ± Rs. 3,60,000; D Sales ± Rs.21,60,000 8. The competing companies, P Ltd. And Q Ltd., produce and sell the same type of product in the same market. For the year ended March 2009 their forecasted profit and loss accounts are as follows: P Ltd Q Ltd Rs. Rs. Rs. Rs. Sales 3,00,000 3,00,000 Less: Variable cost 2,00,000 2,25,000 Fixed cost 50,000 2,50,000 25,000 2,50,000 Estimated profit 50,000 50,000 You are required to calculate: (a) Profit volume ratio, breakeven point and margin of safety of each business. (b) State volume at which each business will earn a profit of Rs. 30,000. (c) Explain giving reasons which business is likely to earn greater profits in the conditions of (i) Heavy demand for the product (ii) Low demand for the product Ans: (a) P Ltd Q Ltd P/V ratio 33.33% 25% BEP Rs.1,50,000 Rs. 1,00,000 M/S Rs. 1,50,000 Rs. 2,00,000 (b) Desired sales Rs. 2,40,000 Rs. 2,20,000 (c) (i) P Ltd., (ii) Q Ltd. 9. The competing companies, ABC Ltd. and XYZ Ltd., produce and sell the same type of product in the same market. For the year ended March 2009 their forecasted profit and loss accounts are as follows: (HW) ABC Ltd XYZ Ltd Rs. Rs. Rs. Rs. Sales 3,00,000 3,00,000 Less: Variable cost 2,00,000 1,50,000 Fixed cost 25,000 2,25,000 75,000 2,25,000 Estimated profit 75,000 75,000 You are required to calculate: (a) Profit volume ratio, breakeven point and margin of safety of each business. (b) State volume at which each business will earn a profit of Rs. 30,000. (c) Explain giving reasons which business is likely to earn greater profits in the conditions of (iii) Heavy demand for the product (iv) Low demand for the product Ans: (a) ABC Ltd XYZ Ltd P/V ratio 33.33% 50% (b) BEP Rs.75,000 Rs. 1,50,000 (c) Low demand ABC Ltd., High demand XYZ Ltd. 10. A company proposes and markets industrial containers and packing cases. Due to competition the company proposes to reduce selling price. If the present level of profits is maintained, indicate the
000 units. 40. (iv) Rs.000. 1. Calculate present and future P/V ratio. 1. Profit ± 10. Rs.00.000. (b) 40.6 1.50.000 (iii) 2. 40. Fixed cost ± Rs.000 Fixed cost 70.89.50. number of units to be sold if the proposed reduction in selling price is ± (a) 5% (b) 10% and (c) 15%.000. 16. 1. Fixed cost ± Rs.20.80. Variable cost ± 70% (HW) Find out (i) P/V ratio.000.000.000 units? Ans: BEP ± 10. 60.1 58.925 17. 20 What should be the selling price per unit. Fixed overhead cost is Rs. 54. selling price per unit ± Rs. Ans: (i) 15.11. Rs. How many units must be sold to earn the present total profits? Ans: P/V ratio ± 40%.50. Present sales (30000 units) 3.00. (b) increase by 10%.000.400 General and Administration expenses 1. 14.000 Net profit 50.000 units Sales ± 1.20. and (c) 48. 1.000. 15. 24 From the following information.000 is required? Ans: (a) 1. 6 per unit. if the breakeven point should be brought down to 6.400 per month and variable cost is Rs.000 Ans: (i)30% (ii)20. (b) If present selling price is maintained and the sales volume is increased.500.000.000 An analysis of Modern manufacturing Co.286 units.650 (b) 1. 13. Ltd. find out the breakeven point: (HW) Variable cost per unit ± Rs.700 Budgeted sales for the next year are Rs.4 Factory overhead 12.00.00. 2.800.000 (b) 4. An analysis of costs of a company led to the following information: (HW) 4 . 34.00. (iii) (a) Rs. There is a proposal to reduce prices by 10 percent.000 Sale of a product amounts to 200 units per month at rs.000 Ans: 1.12. Loss can be made good either by increasing the sales price or by increasing sales volume.000. What are breakeven sales if (a) Present sales level is maintained and the selling price is increased.000 Variable cost 1.000 and relevant information is as follows: Sales ± Rs. 12. 92. What would be sales if a profit of Rs.000. You are required to determine: (i) The breakeven sales volume (ii) The profit at the budgeted sales volume (iii) The profit if actual sales (a) drop by 10%. led to the following information: Variable cost (% of sales) Shut-down cost Direct Materials 32.900 Distribution expenses 4. fixed expenses ± Rs.1 66. (iv) The profit if actual sales increase by 5% from budgeted sales. (ii) Rs. ascertain by how much the value of sales must be increased by the company to breakeven: (HW) Sales ± Rs. 267 units From the following particulars.50. 3. 10 per unit. Variable cost ± Rs. 18.00.350. 73. Variable cost ± Rs.00.000 2. 331/3%.00.000 Ans: (a) 34. 15. SP/unit ± Rs. (ii) Fixed csot (iii) Sales volume to earn a profit of Rs.000 A company is making a loss of Rs.8 Direct labour 28.00.
667 (d) Rs.46.000. 2.) Period I 4. 62. 22.83. (iii) (a) Rs.000 Assuming that there is no change in prices and variable costs and that the fixed expenses are incurred equally in the two half periods.00.900 Budgeted sales for the next year are Rs.4 Factory overhead 11.6 1.) Total cost(Rs.) Sales 55. a multi product company.000 3.000 (ii) Loss Rs. 19. 1.000 Profit -5. furnishes you the following data relating to the year 2009 First Half of the year Second Half of the year Sales Rs. (viii) Sales to generate a profit of Rs. 25. You are required to determine: (v) The breakeven sales volume (vi) The profit at the budgeted sales volume (vii) The profit if actual sales (a) drop by 12. (ii) Rs.18.00. 50.000 (e) Rs.000 sales (iii) Sales to earn a profit of Rs.000 65.000.000 3.12.000. 20.000 Rs.000.000 Loss 2.20.. (ix) Ans: (i) 15.10. 4.500 (d) Rs.20.000 5 .) Profit (Rs.) Period I 1.000 The following information relates to production and sale of an article for November and December 2009: (HW) November (Rs. 75.000 80. Calculate for the year 2009. 1. 20.333 Rakshaa Ltd. (b) increase by 10%.66. 65. 55.) December (Rs.400 General and Administration expenses 1.500 The following figures of sales and profits for two periods are available in respect of a concern: (HW) Total Sales (Rs.) February (Rs.3 63.000 Rs.400 -Calculate: (i) Breakeven sales volume (ii) profit or loss at Rs.60.000. (i) The P/V ratio (ii) Fixed expenses (iii) breakeven sales (iv) Percentage of margin of safety The following information relates to production and sale of an article for January and February 2009: January (Rs.000 sales Ans: (i) Rs.) Sales 38.66. 45. (b) 1. 46. Variable cost (% of sales) Shut-down cost Direct Materials 33.1 99.6 Direct labour 28.50. (iv) Rs.000 (e) sales required to earn a profit of Rs. 49.000 23.000 The following figures of sales and profits for two periods are available in respect of a concern: Sales (Rs.700 Distribution expenses 3.000 Profit -3.000 You are required to find out: (a) P/V ratio (b) Fixed cost (c) Breakeven point (d) profit at an estimated sale of Rs.000 Period II 1. 20.000 15.54.000 You are required to find out: (b) P/V ratio (b) Fixed cost (c) Breakeven point (d) sales required to earn a profit of Rs.000 Ans: (a) 40% (b) 25. 2. 800 (iii) Rs.00. 50. 25.000 Ans: (a) 30% (b) 80. 21.000 (c) Rs. 55.000.25. 20.000 Period II 3.00.000 (c) Rs.000 Total Cost Rs.5%.
5. 60. 24. Has prepared the following budget estimates for the year 2008-2009.000 (iv) Rs. (HW) From the following information calculate: (HW) (i) P/V ratio (ii) Breakeven point (iii) Margin of safety Rs.000 Sales Rs. (c) Increase of sales volume by 2. Fixed cost Rs.00. 15. 28. 25.60. find out the margin of safety.143 (ii) Loss Rs.9.000 in fixed costs.000 sales Ans: (i) Rs.90.23. Loss 2. breakeven sales Rs.000 during the year 2009.60. 25.000 Selling price. breakeven point and margin of safety in each of the following cases (a) Increase of 10% in selling price. (b) Decrease of 10% in variable costs.00.000 sales (iii) Sales to earn a profit of Rs. Is 50% and the margin of safety is 30%. 30.00. 600 (iii) Rs.857 A company has earned a profit of Rs.000.50 and Rs. 62. 27. 10.000 Variable costs Rs. 29.000. Make or Buy Decision: 6 . which represents 30% of sales. 2.10. Sales (Units) 21. 7 per unit You are required to (i) Find the P/V ratio. You are required to work out the Breakeven sales and the net profit if sales volume is Rs. 1.00. 15.000 -Calculate: (j) Breakeven sales volume (ii) profit or loss at Rs. Calculate (a) Sales (b) Breakeven sales (c) Fixed cost and (d) profit You are required to calculate (a) P/V ratio (b) Margin of safety (c) Sales and (d) variable cost from the following figures. 26. If the marginal cost and selling price of a product are Rs.000 Fixed expenses Rs. Manjula Ltd.000 (iii) Rs. 2.000 You are given: (HW) Margin of safety Rs. P/V ratio 40%. 25.000. per unit 100 Variable cost. 7. by how much is the margin of safety reduced? Ans: (i) 50% (ii) Rs. 2. Profit Rs. You are required to work out the BEP and net profit if sales volume is Rs. and (d) Increase of Rs. per unit 50 Fixed cost 1. Problems on Decision Making (Advanced Problems) I.000. breakeven point and margin of safety (ii) Calculate the revised P/V ratio.000 The P/V ratio of Devi Ltd. 97. Total Sales 3.000 (HW) The P/V ratio of a firm dealing in precision instrument is 50% and margin of safety is 40%. 10 per unit respectively.500 units.60. 75.000 --------------------------------------------------------------------------------------------------------------------(iv) If the selling price is reduced to Rs.
the same is available in the market at Rs. A radio manufacturing company finds that while it costs Rs. Buy) 3. 1.8 to make each component No. 4. Make 2. Item per unit (Rs.75 each. 1. Per unit (Rs) Material 270 Labour (25% fixed) 180 Variable expenses 90 Fixed expenses 135 a) The purchase manager has an offer from a supplier who is willing to supply the component at Rs.25 -------------Total cost Rs.85 each? (HW) (Ans. 1.75 Wages Rs. Make 2. Should the component be purchased or produced? b) Assume the resources now used for this component are to be used to produce another mew product for which the selling price is Rs. Material Rs.50eash. 540. 5. 1. 6. The cost structure of the component is as below. 6.1. the same is available in the market at Rs. 5.000 units of the product can be produced at the same cost of labour and expenses. Discuss whether it would be advisable to divert the resources to manufacture that new product on the footing that the component 7 . A TV manufacturing company finds that while it costs Rs.000 units for a motor component.6. Auto part Ltd. with an assurance of continued supply. 485 and materials required will be Rs.50 (Ans. 90.25 --------------a) Should the company make or buy? b) What would be your decision if the supplier offers the same component at Rs.25 to make a component x27Q.50 to Rs. Buy) 2. 200 per unit. 011.) Materials 3 Labour 2 Other variable expenses 1 Depreciation and other fixed costs 2 Total cost 8 Should the company make or buy? Give also your views in case the supplier reduces the price from Rs. The breakdown of cost is. The breakdown of cost is.50 Fixed overheads Rs. Has an annual production of 90.75 Other variable overheads Rs. 2. 6. 0.
Buy) Product Mix (or) Sales Mix: 1.) Y (Rs.) Contribution per unit 2 3 Required production hours per unit 1 2 Sales (units) 1500 800 Available production hours =2000 hours.25 . Nil units of X & 400 units of Y C.) Selling price per unit 25 Direct material per unit 8 Direct wages 24 hours @0. 1. 1500 units of X and 250 units of Y) 2. B and C.000 2. (Ans. (HW) 3. Make 2.400 The total hours available are 200 hours per month.000 4. be purchased from the market. 250 units of X & 250 units of Y B. Particulars X (Rs. From the following information you are required to.000 2. Calculate and present the marginal product cost and contribution per uit.000 C 50 20 6. 400 units of X & 100 units of Y Problems on special order: 8 Y (Rs) 20 6 16 hours @0. State which of the alternative sales mix you would recommend to the management and why? Particulars X (Rs. produces three products A.25 per hour Fixed over heads Rs. Rashika Ltd.II. Alternative sales mixes: A. presently being produced would. 750 Variable over heads are 150% of direct wages.000 B 80 60 8. The following facts are given. A company produces two produces namely X and Y. Advise the management on the profitable product mix. Particulars Selling price per unit Variable cost per unit Maximum production Per month (units) Maximum demand Per month (units) A 100 60 5. Determine optimum product mix. instead of being produced. b. (Ans. the cost and other details of three products are as below. a.
2. 52.000 Wages Rs. The following particulars are extracted from the records of a company. 10.000 units is received from a foreign country at Rs.000 Total cost 1.000 Variable 16. 65 per unit. M/S Mini Toy Ltd received an offer from a customer for 10. There has to a slight modification in the design so as to differentiate it from the same product sold to regular customer. 80 per unit. 40. 15 each. The company expects to incur its regular unit variable costs and in addition it must absorb Rs. Particulars per train (Rs) Selling price 20 Material Rs 4 Labour Rs 4 Over heads Rs 10 (60% Fixed) -----18 Profit 2 The management has almost decided to turn the offer saying that the price offered is less than the cost per unit.000 units at a selling price of Rs. but it will not affect the direct product costs.000 as the cost of freight to the customer¶s godown.000 toy trains at Rs. Fixed 12.000 Factory overheads: Rs.000 Administrative overheads (fixed) 18. Production and sales . The company¶s previous year cost data are as below.35. Should this order be accepted or not? (HW) Problems on Key factor: 1.000 Selling and distribution overheads: Fixed 10. Materials Rs. Particulars (per unit) product A Selling price 100 Material consumed 2 kgs 9 product B 120 3 kgs .000 trains. 36. Advise the management in this matter. Indo ± British company has a capacity to produce 5000 units but actually producing only 2000 units for the home market at the following costs. but before writing to the customer the management requests your advice.1. An additional order for the supply of 3.000 The home market can consume only 2.000 Variable 20.
Upto what minimum price the producer should continue producing and selling? 3. 4.000 but if suspends production he will continue to incur fixed costs to the extent of Rs. Comment on the profitability of each products when.2. Raw material is in short supply.5. There will be additional shut down cost of Rs. During the previous year a firm sold 50.000 will continue to be incurred even if the factory is shutdown for a year. a. Variable cost per unit is Rs. 5.000 per month. What is the minimum price at which the plant can be kept operational. In that case there will be an additional shut down cost of Rs. 40 per unit. Monthly fixed cost amounted to Rs. 60 whereas the variable cost was Rs. A producer is selling a product at Rs. 3. 45. He believes he will be able to sell at Rs. c.65. And maximum sales potential of each product being 3.5 h 2h Fixed overheads 5 10 Variable overheads 15 20 Direct wages per hour is Rs.000 per month. 50.000 units per month. Total sales potential in units is limited. 6.10. The coming twelve months period is declining economic activity and the producer is not expecting to recover full cost. What is the minimum level of annual output and sale below which the factory should suspend production activity? (HW) 4.000 per annum of which fixed cost of Rs.000 is unavoidable fixed cost.Material cost 10 15 Direct labour cost 15 10 Direct expenses 5 6 Machine hours used 1. Problems on shut down or suspending activities: 1. Monthly fixed cost is Rs.00. The current year is of extreme depression and the selling price is coming down. Variable cost per unit is Rs.500 units find out the product mix which will yield maximum profit.000.000 units per month at a price of Rs.28. b. availability of which is 10. Monthly fixed cost is Rs.00. 6. Production capacity (in terms of machine hours) is the limiting factor. If the plant has to remain operational the producer must produce atleast 20. 20.00.80.000 units. Assuming raw material as the key factor.000 kgs. 2.000 per month. 30 per unit. With best effort the firm can keep variable cost down to Rs. 1.00. 80 per unit in a market suffering from acute depression. Per unit variable cost of a product is Rs. 4.000 of which Rs. Total sales potential in value is limited. (HW) 10 . d. The minimum level of monthly output to keep the plant running cannot be below 25. 80 per unit. A single product producer is incurring fixed cost of Rs. 4. What is the minimum level of sales in units upto which he should continue producing assuming that the price does not fall below Rs. if the firm decides to temporarily close down.000.10.
This year. K Balakrishnan (C) 1977 by the Indian Institute of Management. --------------------------2. Elimination of middlemen would.´ and by how much? Assignment Submission Date: 1. Amrita had made a net profit before tax (NPBT) of 10 percent on sale of Rs 20 lakhs. of course. but in absolute amount). How much the variable costs need to be reduced next year in order to make the same NPBT (not in terms of percentage. distribution. under the new scheme as they made this year.8 lakhs next year under the new arrangement. and other marketing efforts. They were not willing to give the details of the sole selling agency agreement and how much variable cost they would eliminate by the switch-over. If they are likely to make a NPBT of Rs 1. --------------------------3. Ahmadabad. what do you think is happening to their break-even? Would they have a larger or smaller ³margin of safety.0 lakhs to 3.0 lakhs owing to the additional warehousing. It is feared that elimination of the sole selling agency and selling directly to retailers would result in a 40 percent drop in sales next year. ---------------------------Case Study Submission Date: ----------------------Additional notes: 11 . save Amrita a substantial chunk of variable costs. Instead.CASE STUDY: AMRITA TEA By Prof. they wanted advice on the following: 1. Fixed expenses would increase from the present figure of Rs 2. The government started devising schemes to eliminate middlemen and Amrita wanted to respond to the new public policy towards private distribution. 2. Amrita tea of Darjeeling had always sold its products through a sole selling agency.
It is recognized that the estimated sales by Department II represent an unsatisfactory target.5 Strategic management Accounting Unit ± II Budgetary Control Course Instructors: Mr.75. It is also expected that by increasing production and arranging extensive advertisement. The sales budgets for the year ending 31st December 2009 were: Hero ± Department I ± 3. N. and Department III ± 20. Sales prices are Rs.500.000. Department III ± 1. P. Annie Kavitha Name of the student: Coverage: 1. Department II ± 6.00.20 in all departments.000. 7.000. It is estimated that by forced sales promotion. The sales division of the company has three departments in different areas of the country. Department II ± 5.000 and Zero ± Department I ± 4. Ramesh Babu& Mrs. Budgeting & Budgetary Control Various functional Budgets Flexible Budget Cash Budget Zero based Budgeting Master Budget Case study Roll No: Sales Budget: 1. 6. Manufactures two brands of Pen Hero & Zero. 3 and Rs. It is agreed to increase both estimates by 20%. 3.000.000.80. 2.000. 5. Department III will be enabled to increase the sale of µZero¶ by 50. Production Budget & Production Cost Budget: 12 . 1. Ltd.62.00.00. Prepare a sales budget for the year 2009.PGDM 3. 4. the sale of µZero¶ in department I will increase by 1.
000 December 4.000. 2009 are as follows: Production (units) 44. Ans: 11. and 13 (i) . Prepare a production budget for each month and a summarized production cost budget for the six months period ending 31st December 2009 from the following data of product µX¶. 2009 1. (iii) Finished units equal to half the sales for the next month will be in stock at the end of each month (including June.000.000 (ii) There will be no work in progress at the end of any month. and (b) Production Cost Budget for the same period.600 January.98.000 (ii) There will be no work in progress at the end of any month. 2009) (iv) Budgeted production and production cost for the year ending 31st December. 2009 are as follows: Production (units) 22. 2010 2.300 January. 4 Total factory overheads apportioned to products Rs. The units to be sold for different months are as follows: July. 10 Direct wages (per unit) Rs. It is required to prepare: (c) Production Budget for the last six months of 2009.000 Direct materials (per unit) Rs. (i) Prepare a production budget for each month and a summarized production cost budget for the six months period ending 31st December 2009 from the following data of product µFish plate X¶. 88.100 September 1.200 September 3.900 November 2.000 Direct materials (per unit) Rs. It is required to prepare: (a) Production Budget for the last six months of 2009. 4 Total factory overheads apportioned to products Rs. The units to be sold for different months are as follows: July. 2009 2.1. 1.500 December 2.400 October 3.050 units. 2010 4.700 October 1. (b) Rs.200 August 2.800 November 5.900. 2009) (iv) Budgeted production and production cost for the year ending 31st December. 88. (iii) Finished units equal to half the sales for the next month will be in stock at the end of each month (including June. 10 Direct wages (per unit) Rs.100 August 1.
Prepare manpower Budget showing Direct labour hours and no.(d) Production Cost Budget for the same period.000 44. Draw up a material purchase budget. material B ± 15. material B ± 15.000 Estimated stock on January 31 20. 2 per hour In Department Q 1 hour @ Rs.000 88.000 units. 1. 20 P.000 2. material A ± 14.000 units 4. Ans: A ± 31. 10 P.000 28. The desirable closing balances at the end of the year are: Finished product ± 16.000 4.000 units 14 F 28. 15 P. A factory works 8 hours a day. of works. B ± 92.32.000 24. The estimated opening balances next year will be: Finished product .000. . prepare a manufacturing overhead budget for the quarter ending December 31. Ans: A ± 1.000 units of a particular product.000 6.000 30 P. 2009: Budgeted output during the quarter 5.000 32.000 Direct Labour Budget: 1. The production department gives the following figures: Two kinds of raw materials A and B are required for manufacturing the product.000 2. From the following figures prepare Raw materials purchase Budget for Jan. holidays etc. 5 P. From the information given below.72.400.000 8.000 Estimated consumption 1. Each product requires 3 units of material A and 2 units of material B.100 units.000 14.20. D ± 3.10. material A ± 12.000 1. 3.000 units. Prepare Manpower budget showing labour cost.000 units. F ± 52. 2009: Materials (units) A B C D E Estimated stock on January 1 16. (b) Rs.600.800. B ± 2.53.000 units.000 units. E ± 18. Manufacturing overhead cost Budget: 1.000 units Required: a.300.000.000 16. 1 per hour 1 hour @ Rs.000 units. C ± 20. 3 per hour 1 hour @ Rs. 3 per hour Units to be produced as Per production budget 10.000 36. Ans: 22. Material cost Budget: 1. Particulars Product A Product B Direct Labour per unit: In Department P 2 hours @ Re. b. lost hours due to live. 6 days in a week and budget period is one year and during each quarter.40. The sales director of a manufacturing company reports that next year he expects to sell 40. estimated to be 124 hours.000 1.000.000 Standard price per unit 25 P.
2.) Travelling Salesmen¶s (Rs. 30.000 1.000 Rs.000 units.50.000 1.400 Semi-variable overheads: Repairs and Maintenance (70% fixed.000 Variable overhead 75. Materials 2. The expenses for the production of 5. The following information relates to a flexible budget at 60% capacity.500 Counter salesmen¶s salaries and dearness allowance 6. 5 per unit) Semi-variable overheads (40% fixed and 60% varying @ Rs. 15.000 1. Sales during the period were estimated as follows: Counter sales (Rs.000 You are required to prepare a budget for the production of 7. Indirect labour 10.Fixed overheads Variable overheads (@ Rs.000 Depreciation 20.000 Fixed overhead 50.300. 3 per unit) Ans: Rs. 76.000 Selling and Administration Budget: Rs.000 Travelling salesmen¶s commission at 10% on their sales and expenses at 5% on their sales.000 Electricity (50% fixed. 50% variable) 25.000 units in a factory are given as follows: Per unit Rs.400 Flexible Budget: 1.000 Expenses of sales department 1.000 10.000 Insurance 4.20.500 Indirect materials 8.000 20.000 15.00.000 Selling expenses (20% fixed) 50.000 Administrative expenses (5% variable) 50.450.000 Ans: 17. You are required to prepare a sales overhead budget from the estimates given below: Rs. 18.200 Fixed overheads: Office expenses including salaries 70.) 80. Advertisement 2. Find out the overhead costs at 50% and 70% capacity and also determine the overhead rates: Expenses at 60% capacity Variable overheads: Rs.40.000 Labour 1.500 Salaries of the sales department 5. 30% variable) 7.000 15 . 19.
Semivariable expenses will not change between 45% and 60% capacity.000 Rent and taxes 40.50.000 It is estimated that fixed expenses will remain constant at all capacities. 10 per unit Factory overheads Rs.00.000 (60% fixed) 4.000 Semi-variable expenses : Repairs 1.24.20.000 ---Direct labour hours ---1. prepare a budget for production at 80% and 100% capacity: Production at 60% activity 600 units Materials Rs.000 Depreciation 60.000 Total overheads ---62. Estimated sales at various levels of capacity are: 16 . 40.000 Labour 2. Draw a flexible Budget for a overhead expenses on bases of the following data and determined overhead rates at 70%. With the following data for a 60% activity.000 (40% fixed) Administrative expenses Rs. 80% and 90% plant capacity Element Cost 70%Capacity 80% Capacity 90% Capacity Variable overheads: Indirect labour ---12.000 ---Stores and spares ---4. will rise by 10% between 60% and 75% capacity. Salaries 50. 70% and 90%. 100 per unit Labour Rs.000 ---Fixed overheads: Depreciation ---11.000 ------Salaries ---10.000 Indirect labour 1. 30. Prepare a flexible budget and forecast the profit or loss at 60%. a further increase of 5% when capacity crosses 75%.50.000 Administrative expenses 70. 40 per unit Direct expenses Rs.000 Variable expenses: Materials 2.000 ---Repairs and Maintenance (40% variable) ---2.000 ---Semi-variable overheads: Power (30% fixed) ---20. Expenses at 50% capacity Fixed expenses: Rs.000 hours ---5. The following information at 50% capacity is given.00.Estimated direct labour hours 1.000 3.000 ---Insurance ---3.000 Others 40.000 Others 90.
00. Furniture purchases for Rs.400 2.750.000 40.000 35.000 4. Ans: May ± Rs.000 2.000 1.000 9.000 May 64.000 10. Infotech commenced its business on 1st April 2009 and deposits Rs 1.000 8.000 40.00.00.000 8.000 4. Relevant data is as under: 1.000 80. (d) Opening Balance of Cash Rs. (e) Lag of one month in expenses.500 You are given the following further information: (a) Plant costing Rs.000 39.000 3. July ± Rs. 3.750 1. 2. 8.000 in SBI.000 Expenses 4.000 5.500 August 60.000 5. March 60.000 38.000 Cash budget: 1. 2009 are given as follows: Months Sales Purchases Wages Manufacturing Office Selling (Credit) (Credit) Expenses expenses expenses Rs.500 4.000 Wages 40. 00. 8. 15.Capacity 60% 70% 90% Sales (Rs.000 is payable in March and June each.200 1. Rs.) 11.000 13.000 40.500 2.000 15. The sum deposited would not be sufficient to finance its operations over a period of 4 months.000 30.000 36.000 50. (b) Advance tax of Rs.000 4. you are asked to prepare a cash budget for the company and also ascertain the OD limits to seek from the banker. June ± Rs.000 9.500 4.000 4. 12.000 Sales 60. The income and expenditure forecasts for months of March to August.500 July 56. All purchases made on 30 days term. Prepare a cash budget for the months May to July.000 80. Budgeted figures April May June July Purchases 50. 18. Rs.000 3. Prepare a cash budget for the three months ending 30th June from the following information: 17 .000 8.000 33.000 34.000. Sales are made on 30 days term. Rs.750 2.000 40.000 April 62. Rs.500 5. 2009.750. As a finance manager. (c) Creditors allow 2 months credit and debtors are paying one month late.500 3.000 is due for delivery in July payable 10% on delivery and the balance after 3 months.500 5. 2% discount.500 June 58.000 3.000 3. 16. Rs.000 4. 3.000 preferred to be made in April. 10.000 70.
000 10.000 3. which means that purchases equal expected sales.000 May 17. (c) Creditors: Materials. and are declared on the fifteenth of the previous month.200 2.000 9. (e) Other relevant information are: 1.600 2.000.000 9. 6.000 9. ½ month. Monthly operating expenses are as follows: $15. Purchases during any given month are paid in full during the following month.000 125 250 2. 2. 2 months Wages.(a) Month Sales Materials Wages Overheads February 14. It desires an ending minimum cash balance of $5. Bad debts are negligible. and rent. beginning January 1. the monthly installment of Rs.000. purchases will cease until inventory reaches $6. 30% in the next month.000 1. Dividend @5% on Case Study (Master Budget) Victoria Kite Company. 2005. In January 1. 50% of the credit sales are collected next month and the balance in the following month. (d) Cash and Bank balance on 1st April expected to be Rs.500 250/MONTH + 10% OF QUARTERLY SALES OVER $10. a small Melbourne firm that sells kites on the web wants a master budget for the next three months.700 March 15.000.200 3.300 (b) Credit terms are: Sales/ Debtors ± 10% sales are on cash. and the additional 10% of sales is paid quarterly on the tenth of the month following the end of the quarter. On January 1. but experience has shown that 60% of current sales are collected in the current month.400 4. The 18 WAGES AND SALARIES INSURANCE EXPIRED DEPRECIATION MISCELLANEOUS RENT . beginning January 15.000 1.000 Cash dividends of $1.600 3. All sales are on credit. 2. and 10% in the month thereafter. except insurance.000 each month. All operating expenses are paid as incurred. Merchandise costs average $4 per kite.000 3. Sales are forecasted at an average wholesale selling price of $8 per kite. 96. Rent of $250 is paid at the beginning of each month. after which time purchases will equal sales. ¼ month Overheads.500 are to be paid quarterly.000 10. payable within 30 days.200 June 18.000 2.000 are payable from April onwards. Plant and machinery will be installed in February at a cost of Rs.900 April 16. Victoria Kite is beginning Just±In-Time (JIT) deliveries from suppliers. depreciation.
850 1.000 $35. The company plans to buy some new fixtures for $3.000 Accounts Payable (Merchandise) Accounts Receivable 12. balance sheet. Compute the interest to the nearest dollar. Prepare a master budget including a budgeting income statement.next settlement is due January 10.500 7.000 38.000 November = 25.000 62. and repayments at the end of he months in question.550 * November 30 inventory balance = $16. Assets as of Dec 31. and supporting schedules for the months January through March 2005.800 $44. Assume that borrowing occurs at the beginning.000 April= $45.500 = $70.000 February= March = $75. Money is never borrowed at the beginning and repaid at the end of the same month.500 = Fixed assets.000 cash in March. 2004 Liabilities as of Dec 31.050 Rent Payable Unexpired Insurance 1. 2004 Cash $5.000 Questions: December = January = $25.000 Recent and Forecasted sales: October = $38. Money can be borrowed and repaid in multiples of $500 at an interest rate of 10% per annum. Interest is computed and paid when the principal is repaid.500 Dividends Payable Inventory* 39. Explain why there is a need for a bank loan and what operating sources provides the cash for the repayment of the bank loan Assignment Submission Date: ---------------------Case Study Submission Date: ----------------------- 19 . 2.550 1. Management wants to minimize borrowing and repay rapidly. statement of cash receipts and disbursements. net 12.
Unit 3 STANDARD COSTING & VARIANCE ANALYSIS Student Name = Roll no. = Coverage:o o o o o o o Introduction Standard Cost Analysis of Variances Material Variances + Problems Labour Variances + Problems Overhead Variances + Problems Sales (or) Profit variances + problems 20 .
= ( AO × SR Per U ) (AO × AR Per U) ( AST × SR Per Hr.a = ( b+c ) .) (AT × AR Per Hr) = AT ( SR Per Hr AR Per Hr ) = SR Per Hr. a = b+(d+e+f ) 21 .Formulae in Standard Costing S. ( AST AT ) Verification :.No I. c = ( d+e ) . a = [ b +( d+e ) ] Labour variances a) LCV = (AST × SR) (AT × AR) b) LPV = AT (SR AR) c) LITV = (SR × AIT) = adverse analysis d) LEV = SR (AST AT*) Note.a = ( b+c ) 2) Fixed / OH / Variances a) F/OH/COST/V = ( AO × SR Per U ) ( AO × AR Per U ) b) F/OH/EXPN/V = ( B/F/OH s A/F/OH s ) c) F/OH/VOLUME/V = SR Per U ( AO BO ) d) F/OH/CAPASITY/V = SR Per U ( RBO ABO ) e) F/OH/CALENDER/V = SR Per U ( ABO BO ) f) F/OH/EFFICIENCY/V = SR Per U ( AO RBO ) Verification :. Summery Standard Costing Formulae Material variances a) MCV = (ASQ × SP) (AQ × AP) b) MPV = AQ (SP AP) c) MUV = SP (ASQ AQ) d) MMV = SP (RSQ AQ) e) MYV = SYR (AY . III.a = ( b+c+d ) . c= (d+e+f) .( AT* =AT AIT ) e) LMV = SR (RST AT*) f) LYV = SYR ( AY RSY ) Verification :. d = (e+f) .RSY) Verification :.a = ( b+c ) . a = [ b+c+(e+f) ] Over head variances 1) Variable / OH / Variances a) V/OH/COST/V b) V/OH/EXPN/V c) V/OH/EFFICIENCY/V II.
SPV c) M/I :.SQV M/II :.PROFIT or Sales Margin method (m/I ) Method 2 :.SMV M/II :. MUV = 200 (F).5.670 Kgs.200 Kgs. The budgeted output for the period was 7. of products.650 1. the following standards apply:- Standard price: Raw material A Rs.4.850 . Ans: MCV = Rs 100 (F). Output:.600 Kgs. Raw material B Rs. MYV = 600 (F). 1 per kg. Calculate all the Variances.: TURNOVER or Sales Value Method ( M/II ) a) M/I :. c = ( d+e ) . 22 .IV.400 Kgs. MPV = (100) (A). Used :. 25 % B (by weight) Standard Yield 90 % In a period.SVV M/II :. the actual costs. of A costing Rs 4. Sales Variances Method 1 :. a = [ b +( d+e ) ] PROBLEMS ON MATERIAL VARIANCES 1) In a manufacturing process. 5 per kg Standard Mix 75 % A .SSeV = AQ ( Apt SPt ) per U = AQ ( ASP SSP ) per U = SPt per U ( AQ SQ ) = SSP per U ( AQ SQ ) = SPt per U ( AQ RSQ ) = SSP per U ( RSQ SQ ) = SPt per U ( RSQ SQ ) = SSP per U ( RSQ SQ ) Verification :. of B costing Rs 7. usage and output were as follows.TSVV = ( AQ × ASP per U ) ( SQ × SSP per U ) b) M/I :.SPV M/II :. MMV = 400 (F).a = ( b+c ) . .SVV d) M/I :.SMV e) M/I :.TSMV = ( AQ × APt per U ) ( SQ × SPt per U ) M/II :.
35(A). 9. 3) MMV. 10. Actual production for a month was 7. 2) MPV. Actual purchases and consumption of material during the month were: Kgs 4.50 Rs. 4. 2) 360 (A) 3) 2440 (A) 4) 200 (A) 5) 2240 (A) 3. 5. MMV = 10.00 Rs.50 You are required to calculate & present the following variances: . per Unit 128 144 252 524 Actual output was 90 units Calculate the appropriate material Variances Ans. there is no scrap value. ten mixes were completed and the consumption was: X Y Z 640 960 840 2. MCV = 74 (A).680 2.2) Kgs 50 20 30 The standard mix of product MS is as follows: Material A B C Price per Kg Rs. 5. 23 . 3. 5) MUV Ans: 1) Rs.560 material A B C Price per Kg. per Unit 10 units of the finished product should be obtained from this mix.00 Rs. per Unit Units @30 p. During the month of the march.35(F). MUV = 48 (A). 4) MYV. Rs.820 (A).75 Rs. per Unit Units @20 p.00 The standard loss in production is 10 % of input. 2.240 of MS from 80 mixes. per Unit Units @25 p. 1) MCV. The standard mix of a product is: X Y Z 60 80 100 240 Units @15 p. MPV = 26 (A). MYV = 58.160 1. per Unit Units @15 p.440 Units @20 p.
50 per kg 24 . MCV=30. III. 29.200(A). MYV=53(A) 6.500 kgs. of material Y at Rs. . (Rs) Mix (%) Actual price Per Kg (Rs) Quantity of raw material purchased (Kg) A 50 20 60 21 5.8(A). of material Z at Rs. 1. Standard mixture fixed for a batch of 900 Sq. Material Mix Variances.000 B 30 10 20 8 2.600 kgs of BXE the standard and actual particulars for September 2009 are as fallows:Raw material Mix (%) Standard Price per Kg. During June 2009.00 per kg. Vardhaman Ltd is producing floor mats in rolls of standard size measuring 3 meters wide and 30 meters long by feeding raw materials to a continuous processing machine. manufactures BXE by mixing three raw materials. I. 1. 6. MPV=40.4). Material Yield Variances Ans. S.200 Calculate: I.Ltd. 4. of chemical D over the standard cost ? Ans: MCV=100. 500 kga of chemical D were produced from a mix of: y y y Chemical A 140 kgs at a cost of Rs. 20 kgs. 1. of material Y at Rs. 800 kgs. 588 Chemical B 220 kgs at a cost of Rs. 30.000(A) IV.00 per kg. The standard material cost for 100 kg.200(A) iii. 5.00 per kg. mix & the price factors contribute. 1. for every batch of 100 kgs of BXE 125 kgs of raw materials are used.00 per kg.65 per kg 3.8(A). to the variance in the actual cost per 100 kgs. of material X at Rs. Material Price Variances.860 How do they yield. 2. In a batch. MMV=7(A). MUV=28. MPV=2. II. IV. Chemical C 80 kgs @ Rs.056 Chemical C 440 kgs at a cost of Rs. 00.100 kgs. y y y 3. In September.00 per kg.505 standard size rolls were produced from materials issued for 150 batches. of chemical D is made up of: y y y Chemical A 30 kgs @ Rs. Chemical B 40 kgs @ Rs. of material X at Rs. Material Cost Variances.800(A) 5.000 C 20 5 20 6 1.V.000 kgs.600 kgs. 2009. MYV=16. The actual usage and the cost of material as follows. of floor cover is as follows y y y 20.200(A) V. of material Z at Rs. 19.Mts. MMV=11. ii. 1.10 per kg 1. 1. 60 batches were prepared to produce an output of 5.50 per kg.
630.150(A).650 Calculate a) LCV.75 3.7(F) 7. 20 The work is actually completed in 32 weeks. labour Weekly wage rate No.000 Unskilled worker 10000 0. MUV=1.labour Weekly wage rate Skilled worker 75 Rs 60 70 Rs. MMV=2. Ans :. Ans. d) LMV. MYV=1.50 per hour 7. MPV=46.20 Standard Input (kgs) 50 ? Actual Input (kgs) ? 70 Material Price Variances ? ? Material Usage Variances ? Rs 300 Adverse Material Cost Variances ? ? Material mix variances for both products together were Rs. c) LEV. MCV=47.of. 12 Rs.400(A). MCV = 650(A).For R/M A = Actual Input = 40 kgs . LABOUR VARIANCES Standard labour hours & rate for production of article A are given below Hrs Rate (Rs) Total (Rs) Skilled worker 5 1.000(A).050(F) e) 1.200(A) 1) 25 .400(A) c) LEV=6.of. 15 Rs.500 Semi skilled worker 4200 0.50 Actual Data:. MPV = Rs.000 units Hrs Rate per Hr Total (Hr) Skilled worker 4500 2. c) 400(A).450(A) 2) The details regarding composition & the weekly wage rate of labour force engaged on a job scheduled to be completed in 30 weeks are as follows Category of workers No. 45 adverse. MPV = Rs.00 Semi skilled worker 4 0.440(A).000(A) b) LRV=6. b) LRV. Ans. e) LYV Ans a) 2.150 16.630.50 Unskilled worker 8 0. Calculate the various labour variances.75 per hour 3.45 4. MUV= 120(F).Articles produced 1. a) LCV=Rs 13.600(A) d) LMV=9.750(A). 350(A).50 per hour 4. 120(A).00 9.7(A). MCV = Nil For R/M B = Standard Input = 50 kgs. 50 Semi skilled worker 60 Rs 30 80 Rs.You are required to show the break-up of material cost variances arising during June 2009. 70 Unskilled worker 45 Rs 40 30 Rs. b) 1.00 14. 15 Actual Price / Unit Rs. d) 1.600(F) e) LYV=16. Compute the missing data indicated by Question Marks from the following: Particulars A B Standard Price/ Unit Rs.
semi skilled Rs-36.8. a) LCV=2.8(A) d) LMV=19.424(A). a) LCV=Rs.3) A contract job is scheduled to be completed in 30 weeks with a labour compliment of 100 skilled operatives. the gang as actually compared. b) LRV=2. Compute wages variances? Ans. a) LCV=Rs.6(A) c) LEV=188.200(F) e) LYN=17. produced 1.800(A) b) LRV=10. The standard weekly wages of each type of operatives are skilled Rs. c) LEV=188. 4) The standard labour component & the actual labour component engaged in a week for a job are as under: Skilled Semi skilled Unskilled workers works workers A Standard No.70 In a 48 hour week. & Unskilled Rs-24. Rs. 198.80 Number in actual gang 16 14 Actual rate per hour Rs 1. 65 for skilled. Ans. Calculate the different labour variances.2(F) e) LYV=208(A).200 standard hours.00 Rs 0.of workers employed in the 28 18 4 gang during the week D Actual wage rate per Hour 4 3 2 During the 40 hour working week.40 for semi skilled & Rs.2(F) e) LYV=208(A).800 standard labour hours of work.760(A).440(F) d) LMV=19. and 60 unskilled operatives. The work is actually completed within 32 weeks with a labour force of 80 skilled. Ans. Analyze the variances in the labour cost due to various reasons. 50 semi skilled.4(A) b) LRV=9.240(A) c) LEV=1.60.8(A) d) LMV=19.90 Rs 0. 40 semi skilled operatives. 20 for unskilled labour.of workers in the gang 32 12 6 B Standard wage rate per Hour (Rs) 3 2 1 C Actual no. the gang produced 1. 5) The data obtained from a manufacturing concern are:Men Women Number in standard gang 20 10 Standard rate per hour Rs 0. 26 . & 70 unskilled operatives and the actual weekly wage rates average Rs.000(A).
11.000 units Actual wages paid for 4. @ Rs. Ans. However. Ans.700 lbs.000 lbs. y y Materials purchased 20. of material at the total invoice price of Rs. 48. You are required to compute. 3 Rs.35.20 Rs.5 hours per unit.710(A) c) MUV=420(A) d)MMV=Nil e) MYV=420(A) a. 88. for the month of march.950(A) c) LEV=1. 6.00 per hour. 21 Labour 3 Hours @ Rs.800(F) d)LMV=Nil e) LYV=1.600(A) b) MPV=7.600(A) c) MUV=4.400(A) b) LRV=3. 1. Standard requirement is 2. 8.800 units Rs.950 hours Units produced 1.750 Standard rates & pieces are:y y y y Direct material rate is Rs 4.750(A) b) LRV=4.000 units Materials consumed 19. 2009.000(A) a) LCV=Rs.000 Production records for the month of July 2009 showed the following actual result:y y Materials requisitioned & used Direct labour 15. LCV=Rs. 5. all material & labour variances for the month of march 2009.000 pieces. required completion of 5.000(A) d) MMV=Nil e) MYV=4. Purchases for the month of July 2009 amounted to 30.130(A) b) MPV=7. a) MCV=RS. a) MCV=RS.480.500 Hours 25. 9 The production schedule for the month of July 2009. 2. Direct labour rate is 4. 4. Standard input is 10 numbers for one unit.PROBLEMS ON MATERIAL & LABOUR VARIANCES 1) Trishul industries turns out only one article.120 pieces were actually completed. Rs.000 Rs.800(A) 27 .00 per unit. Calculate appropriate material and labour variances. 24.030(A) c) LEV=630(F) d)LMV=Nil e) LYV=630(F) 2 ) The following information is available from the cost records of Novell & Co. the Prime Cost Standard for which have been established as follows: Per Completed Price Material 5 lbs.
70 .000 20. = Rs 45.725(F).7.500 units Rs 48. = Rs 2.000 1.275 ( favourable ) Rs.3) In a certain period. 7. Var. 7. calculate V/OH variances.000 for 4. c) V/OH eff. = Rs 30.77.000(A).000(A).850 ( favourable ) Rs.000 Rs 2. = Rs 60. 3. Var. 1. 700 (adverse ) Rs. Var.000 (A) 3) From the following data.00 per unit. budgeted Actual Standard overheads Rs 2. = Rs 40. = Rs 1.50. Budget production for January 300 units Budgeted variable overhead Rs. 1. S/L/C per unit=Rs.500(F) e) F/OH Cal.000 5. Var. Rs.25.= Rs 20. 5. 40. 13.000 Ans: V/OH Cost var. Var.875 ( adverse ) Rs. b) V/OH exp.500 Hrs Actual work overhead Rs. 1.000(F) f) F/OH Eff. PROBLEMS ON OVER HEAD VARIANCES 1) The following data is obtained from the books of a manufacturing company regarding VARIABLE overheads.000 Rs. = Rs. 3. 1. Calculate V/OH variances.75.500 Output per man hours in units 2 1. Var. c) F/OH Vol.500(A).275(A) 28 .225(F) d) F/OH Cap. = Rs 500(A) b) V/OH exp. Var.30.500 Ans: a) F/OH Cost Var. Var.60.200 ( favourable ) Ans: S/M/C per Unit = Rs.000 Output in units 25.000 Working hours 1. = Rs 650(F) 2) From the following data. Var.800 Standard time for one unit 20 Hrs Actual production for January 2009 250 Units Actual hours worked 4. calculate the F/OH Variances: Item budgeted actual Over heads Rs. b) F/OH Exp.10. = Rs 22.000 Ans: a) V/OH cost Var.250 Hours Rs 34.750 for 16. S/P/C per unit = Rs.000 Kgs Output Wages paid Material Variances: Labour Labour efficiency Labour idle time Material price Material usage Calculate the Standard Prime Cost per Unit. = Rs 48.150(A) c) V/OH Eff. results were as follows: 6.9 Number of working days 25 27 Man hours per day 5.
d) 2.480(A).500(F).I.000(F).of working days 20 22 Man hours per day 8.of working days 25 27 Fixed overheads Rs.000 units 16.800(F).500 Variable overheads Rs. I. e) 2.100(A).800 Working days 20 21 Fixed overhead (Rs) 40.000 You are required to calculate the following overhead variances.68. a) 1. 1. 600(A) II.000 Rs.000(A) 6) From the following data. b) 2. b) 500(A).000 Variable overhead (Rs) 12. Variable Overhead Variances II. 500 There was an increase of 5% in capacity. 45. II.000(F). calculate the V/OH Cost Variance & all F/OH Variances :budgeted Actual Output 15.000 3. 30.000 Rs.000 12.400(F). Ans . c) Rs 16. e) Rs 8.000(F).0 0.000(A).320(F). d) 1. c) 6. assuming that there was a 5 % increase in capacity:.680(A) 5) The following information has been obtained from the records of a manufacturing organization using the Standard Costing System :Standard Actual Production (units) 4. I.620(F). d) Rs 6. f) 1. 30.000 8.4) From the following data.000(A).000 units No.100(F). calculate F/OH Variances :a) Effective Variance b) Capacity variance c) Calendar variance d) Volume Variance e) Expenditure Variances f) Cost Variances Item Budgeted Actual No. a) Rs. f) Rs 1. 47. c) 2.000(F).000 1. b) Rs 8.9 Overhead (Rs) 1. Fixed Overhead Variances a) Expenditure Variances d) Calendar Variances b) Volume variances c) Efficiency variances e) capacity Variances f) Cost Variances also prepare a statement reconciling the standard fixed overhead worked out by using the standard overhead rate & the actual fixed overhead Ans . e) 2.400 Output per man hours in units 1. 29 .000 Ans.000 39. Rs 1.020(A). a) Rs 18. f) 2.000(F).60.
000(A). 65 respectively.2. 5. b) 4. d) 230(A). 85. c) 250(F). SPV b) SVV c) SMV d) SQV e) TSMV/TSVV Ans : Sales Variances under M/I = a) Rs.2.500 units for Rs.000 Rs. c) 5. 12 Rs. 55 per unit Toy B 700 units @ Rs.000 You are required to calculate the following variances on the basis of profit & turnover:i. 4 R 2.500(A) Sales Variances under M/II = a) Rs.000 Q 2.100 units @ Rs.500(F). 78 per unit The cost per unit of A. e) 1.B & C was Rs. d) 5.PROBLEMS ON SALES OR PROFIT VARIANCES :1) Modern toys Ltd. 21.50 per unit y Toy B 650 units @ Rs. e) 3. 95 per unit Toy C 1.500 units for Rs. 15. 6 Q 2. 75 per unit As against this. the actual sales were:y y y Toy A 1.050(F). b) 5. d) 12. 5 Rs. c) 7. 17.500(F) 30 . e) 480(F).800(F).000 units @ Rs. & R. Had budgeted the following sales for December 2009:y Toy A 900 units @ Rs. 1 Actual Sales P 1.500 R 3. Compute the different variances to explain the difference between the budgeted and actual profit.200 units @ Rs.000 Rs.000 Rs. Rs. Q.000(A). Ans:.000(A).500 units for Rs.500(F). And gives you following information for the month of June 2009:Budgeted sales Product Units sold Selling price per unit Std margin per unit P 2. 100 per unit y Toy C 1. b) 500(F).Sales Variances under M/I = a) Rs. 8 Rs.500(F). 2) The sales manager of a company engaged in the manufacture and sales of 3 products P. 45.000(A). & Rs.
SPV = Rs. SVV = 6.3). 450 F. 1.200 F ? Rs 15 20 ? ? ? Sales mix variances for both the products together was Rs. Compute the missing data indicated by the question marks from the following: Sales quantity Standard (units) Actual (units) Product R ? 500 Product S 400 ? Price/Units Standard Actual Sales Price variances Sales Volume Variances Sales value variances Rs 12 15 ? 1.700(F) For Product S Actual input = 800 units. SPV = Rs. 4. 31 .000(F).000(F).000(F). S/value/V = 6. F denotes Favorable Ans : For Product R Standard input = 400 units. S/value/V = 2.500(F).
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