You are working as a Cost Analyst at TechMech Ltd., a company that manufactures Product-Y, a specialized industrial tool. The company uses standard…

CA Intermediate · Cost and Management Accounting · MTP · January 2026
You are working as a Cost Analyst at TechMech Ltd., a company that manufactures Product-Y, a specialized industrial tool. The company uses standard costing to monitor cost performance. Below is the standard cost structure for one unit of Product-Y: Component Amount (₹) Direct Materials 1,200 15 kg @80 per kg Direct Labour 600 5 hours @120 per hour Variable Overhead 125 5 hours @25 per hour Fixed Overhead 300 Total 2,225 Production Details: Budgeted Output: 3,000 unitsActual Output: 2,750 unitsAbnormal Material Loss: 400 kgIdle Time: 300 hours Actual Costs: Component Amount (₹) Direct Materials 34,94,400 41,600 kg @84 per kg Direct Labour 18,12,500 14,500 hours @125 per hour Variable Overhead 3,62,500 Fixed Overhead 8,50,000 You are required to CALCULATE: (i) Material Usage Variance (adjust for abnormal loss) (ii) Material Price Variance (iii) Material Cost Variance (iv) Labour Efficiency Variance (exclude idle time) (v) Labour Rate Variance (include idle time) (vi) Labour Idle Time Variance (vii) Labour Cost Variance (viii) Variable Overhead Cost Variance (ix) Fixed Overhead Cost Variance.

Suggested Answer and Working Notes:

(i) Material Usage Variance = Std. Price x (Std. Quantity – Actual Quantity Adjusted)= 80 x [(2,750 x 15 kg) – (41,600 – 400)]= 80 x (41,250 – 41,200)= 4,000 Favourable (ii) Material Price Variance = Actual Quantity x (Std. Price – Actual Price)= 41,600 kg x (₹ 80 - 84)= 41,600 x (-4)= 1,66,400 Adverse (iii) Material Cost Variance = (SQ x SP) – (AQ x AP)= (41,250 x 80) – (41,600 x 84)= 33,00,000 - 34,94,400= 1,94,400 Adverse (iv) Labour Efficiency Variance (Exclude idle time) = Std. Rate x (Std. Hours – Actual Hours worked)= 120 x [(2,750 x 5 hrs) – (14,500 – 300)]= 120 x (13,750 – 14,200)= 54,000 Adverse (v) Labour Rate Variance = Actual Hours x (Std. Rate – Actual Rate)= 14,500 x (₹ 120 - 125)= 14,500 x (-5)= 72,500 Adverse (vi) Labour Idle Time Variance = Idle Hours x Std. Rate= 300 hrs x 120= 36,000 Adverse (vii) Labour Cost Variance = (SH x SR) – (AH x AR)= (13,750 x 120) – (14,500 x 125)= 16,50,000 - 18,12,500= 1,62,500 Adverse (viii) Variable Overhead Cost Variance = (SH x SR) – Actual Overhead= (13,750 hrs x 25) - 3,62,500= 3,43,750 - 3,62,500= 18,750 Adverse (ix) Fixed Overhead Cost Variance = Absorbed Fixed Overhead - Actual Fixed Overhead= (2,750 units x 300) - 8,50,000= 8,25,000 - 8,50,000= 25,000 Adverse

Topics: Standard Costing

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