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  • Zamil Industries (Q-7 Aut-16) SOLUTION

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    90 SHAMAZ
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    This document summarizes the material, labor, and overhead variances for a company's actual production of 15,500 units compared to its budget. [1] There were favorable material price and mix variances but an unfavorable yield variance. [2] The labor rate variance was unfavorable but the labor efficiency variance was favorable. [3] The fixed overhead expenditure variance was unfavorable, but the fixed overhead efficiency variance was favorable and the capacity variance was unfavorable, resulting in underapplied fixed overhead overall.

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    Zamil Industries [Q-7 Aut-16] SOLUTION

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    This document summarizes the material, labor, and overhead variances for a company's actual production of 15,500 units compared to its budget. [1] There were favorable material price and mix variances but an unfavorable yield variance. [2] The labor rate variance was unfavorable but the labor efficiency variance was favorable. [3] The fixed overhead expenditure variance was unfavorable, but the fixed overhead efficiency variance was favorable and the capacity variance was unfavorable, resulting in underapplied fixed overhead overall.

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    7 views2 pages

    Zamil Industries (Q-7 Aut-16) SOLUTION

    Uploaded by

    90 SHAMAZ
    This document summarizes the material, labor, and overhead variances for a company's actual production of 15,500 units compared to its budget. [1] There were favorable material price and mix variances but an unfavorable yield variance. [2] The labor rate variance was unfavorable but the labor efficiency variance was favorable. [3] The fixed overhead expenditure variance was unfavorable, but the fixed overhead efficiency variance was favorable and the capacity variance was unfavorable, resulting in underapplied fixed overhead overall.

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    of 2

    SOLUTION [Q-7 Aut-16]

    Standard card Qty. Rate Amount


    Direct material: (Rs.) (Rs.)
    - Axe 1Kg 160.00 160.00
    - Zee [210 ÷ 2kg] 2Kg 105.00 210.00
    Direct labor [200 ÷ 0.8hr] 0.8hr 250.00 200.00
    Variable OH (W-1) [200 ÷ 0.8hr] 0.8hr 180.00 144.00
    Fixed OH (W-1) 0.8hr 45.00 36.00

    W-1
    OAR per hour [180 ÷ 0.8hr] 225.00
    Fixed OAR per hour [540,000 ÷ 12,000*] 45.00
    Variable OAR per hour 180.00

    * Budgeted hours = 15,000 x 0.8 = 12,000

    Actual production [12,000 + 8,500 - 5,000] = 15500 units

    (a) (i)
    Material price variance = SC x AQ(used) - AC x AQ(used)
    Axe Zee
    = 160 x 16,000 - 2,386,000* = 105 x 29,000 - 3,587,000*
    = 174,000 = (542,000)

    * 9,000 x 150 + 7,000 x 148 = 2,386,000 * 4,000 x 120 + + 6,000 x 122 + 19,000 x 125 = 3,587,000

    Material mix & yield variances


    SQ in SM AQ in AM AQ in AM
    [1] [2] [3]
    ------------------- Kg ---------------------
    Axe 15,500 16,000 15,000
    [1 x 15,500] [45,000 x 1/3]
    Zee 31,000 29,000 30,000
    [2 x 15,500] [45,000 x 2/3]
    46,500 45,000 45,000

    Mix variance = [(3 - 2) x SC] Rs. Yield variance = [(1 - 3) x SC] Rs.
    Axe [(15,000 - 16,000) x 160] (160,000) Axe [(15,500 - 15,000) x 160] 80,000
    Zee [(30,000 - 29,000) x 105] 105,000 Zee [(31,000 - 30,000) x 105] 105,000
    (55,000) 185,000
    (a) (ii)
    Labor rate variance Labor efficiency variance
    = SR x AH - AR x AH = SR x SH - SR x AH
    = 250 x 11,780 - 3,298,400 = 250 x 0.8 x 15,500 - 250 x 11,780
    = Rs. (353,400) = Rs. 155,000

    (b)
    Rs.
    Fixed OH expenditure variance
    = Budgeted - Actual
    = 540,000 - 583,000 (43,000)

    Fixed OH efficiency variance


    = SR x SH - SR x AH
    = 45 x 0.8 x 15,500 - 45 x 11,780 27,900

    Fixed OH capacity variance


    = SR x AH - SR x BH
    = 45 x 11,780 - 45 x 12,000 (9,900)

    Under applied fixed OH (25,000)

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