Q#2: Following is the information of Zafar corporation for the month of January 2019.

Variance
STANDARD ACTUAL
ITEMS
COST COST Favourable UnFavourable

  Rs. Rs. Rs. Rs.

D.Material ? 90,000    
Price Variance     7,000  
Quantity Variance       5,000
         
Direct Labour ? 160,000    
Rate Variance       4,500
Efficiency Variance     10,500  
         
FOH cost 160,000 ?    
Controllable variance     10,000  
Volume Variance       16,000
REQUIRED:-
•Find out the missing figure of the table
•Record journal entries and close variance accounts.
Material

Actual Cost 90,000

Add: Material Price Variance (Fav) 7,000

Less: Material Quantity Variance (U.Fav) (5,000)

Standard Cost 92,000

LAbour
Actual Cost 160,000

Add: Labour Efficiency Variance (Fav) 10,500

Less: Labour Rate Variance (U.Fav) (4,500)

Standard Cost 166,000

Factory Overhead

Standard Cost 160,000

Add: Volume Variance (U.Fav) 16,000

Less: Controllable Variance (Fav) (10,000)

Actual Cost 166,000

 M/s Zafar Corporations
JOURNAL ENTRIES

DATE PARTICULARS P/R DEBIT CREDIT

    Work In Process (M)
01    
92,000  
    (U.Fav)
Material Quantity Variance    
5,000  
    Variance (Fav)
Material Price      
7,000
  R.Material        
90,000
  To record material variance
       
02   Work In Process (L)    
166,000  
  Labour Rate Variance (U.Fav)
     
4,500  
   
Labour Efficiency Variance (Fav)
     
10,500
         
Accrued Payroll 160,000
         
To record Labour variance
         
         
03
  Work In Process (F)     160,000
   
    Volume Variance (U.Fav)   16,000
   
  Controllable  Variance ( Fav)     10,000
 
  Factory Overhead
      166,000
 
To record FOH variance
 M/s Zafar Corporations
JOURNAL ENTRIES

DATE PARTICULARS P/R DEBIT CREDIT

    Material price Variance (Fav)
04    
7,000  
   
Labour Efficiency Variance (Fav)    
10,500  
   
Controllable Variance (Fav)    
10,000  
  Cost Of Goods  Sold      
8,000
   
Material Quantity Variance (U.Fav)
     
5,000
         
Labour Rate Variance (U.Fav) 4,500
         
Volume Variance (U.Fav) 10,000
         
  To record Close variances
       
         
         
         
         
         
         
         
Q#3: The Accountant of ABC Company extracted the following information regarding standard
cost and actual cost of Factory overhead of the product manufactured in June 2019.
STANDARD: Rs.9,000 fixed cost and Rs.5,000 variable cost for 10,000 units of normal
volume.
ACTUAL: Rs.9,000 fixed cost and Rs.4,500 variable cost for 8,000 units of Actual Production.
Required:-
Compute Controllable and volume variance from the given information.
 FACTORY OVERHEAD
Standard Variable Cost Per Unit = Std Variable Cost ÷ Std T.Qty

Standard Variable Cost Per Unit = 5,000 ÷ 10,000

Standard Variable Cost Per Unit = 0.5 Per Unit

Budgeted/Estimated FOH = Fixed Cost + Variable Cost(Std V.Cost per unit

× Actual total
Quantity)

Budgeted/Estimated FOH = 9,000 + (0.5 × 8,000)

Budgeted/Estimated FOH = 9,000 + 4,000

Budgeted/Estimated FOH = 13,000

Standard FOH Cost Per Unit = Std FOH Cost ÷ Std T.Qty
Standard FOH Cost Per Unit = 14000 ÷ 10,000

Standard FOH Cost Per Unit = 1.4

Applied/Standard FOH on actual output = Standard FOH Cost Per Unit × Actual Qty
Applied/Standard FOH on actual output = 1.4 × 8,000

Applied/Standard FOH on actual output = 11,200

Volume/ Idle Capacity Variance :
Applied/Standard FOH on actual output 11,200

Less: Budgeted/Estimated FOH (13,000)

Volume/ Idle Capacity Variance (1,800)

Controllable Variance :
Budgeted/Estimated FOH 13,000

Less: Actual FOH (14,500)

Controllable Variance (1,500)