The details corresponding to the manufacture of a product X is as follows: Materials 20 units @3 per unit - 60Wages 10 hours @16 per hour -…

CA Intermediate · Cost and Management Accounting · MTP · May 2025
The details corresponding to the manufacture of a product X is as follows: Materials 20 units @3 per unit - 60Wages 10 hours @16 per hour - 160Production OH 10 hours @20 - 200 Actual Material cost amounts to 25,740 and labour cost amounts to 65,368. The variances have been analysed and the following information is being made available: Material Price Variance - 1170AMaterial Usage Variance - 750FWages Rate Variance - 1352FWages Efficiency - 800APOH Expenditure - 900FPOH Volume Variance - 1400F From the above DETERMINE: i. Actual output in Units ii. Actual price of material per unit iii. Actual quantity of materials consumed iv. Actual wage rate v. Actual hours worked and Standard Hours vi. Amount of overhead absorbed vii. Amount of Overhead incurred viii. Production Overhead capacity variance ix. Production Overhead efficiency variance x. Budgeted output in units.

Suggested Answer and Working Notes:

Working Notes: No. of units produced = Number of units sold + Finished stock = 30,000 + 2,000 = 32,000 units.Actual Cost of Material (Actual Quantity x Actual Price) = 25,740Material Cost Variance = Price Variance + Usage Variance = 1,170A + 750F = 420 AStandard Cost of Materials (Standard Quantity x Standard Price) = Actual cost + Cost variance = 25,740 - 1170 + 750 = 25,320SQ x SP = 25,320, SP = 3 per unit hence SQ = 8,440 AQ x SP = (SQ x SP) + Usage Variance = 25,320 – 750 = 24,570Hence AQ of Material = 8,190 AQ x AP = 25,740Hence AP of Material = 3.142 Actual Wages paid (AH x AR) = 65,368Wage cost variance = Wage efficiency variance + Wage rate variance = 1352 F - 800 A = 552 FSH x SR = Actual Wages paid + Wage cost variance = 65,368 + 552 = 65,920 SH = 4,120 hours AH x SR = SH x SR + Efficiency variance = 66,720 AH thereon = 4,170 hours AH x AR = 65,368 AR = 15.676 SH x SR (Absorbed Overheads) = 4,120 x 20 = 82,400 Actual Output = 4,120/10 = 412 units OH Cost variance = Volume Variance + Expenditure Variance = 1,400 F + 900 F = 2,300 FActual FOH = 82,400 - 2,300 = 80,100Budgeted FOH = Actual FOH + Expenditure Variance = 80,100 + 900 = 81,000BO x SR = BFOH = 81,000/200 = 405 units Budgeted Units = 405 units (SH x SR – AH x SR) = 82,400 – (4,170 x 20) = 1,000A OH Efficiency Variance = 1,000A AH x SR - BFOH = 83,400 - 81,000 = 2,400 F OH Capacity Variance = 2,400 F

Topics: Standard Costing

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