BabyMoon Ltd. uses standard costing system in manufacturing one of its product 'Baby Cap'. The details are as follows: Direct Material 1 Meter @60…

(i) Material Variances Budget Quantity (Meter) Price (₹) Amount (₹) 1 60 60 Std. for actual Quantity (Meter) Price (₹) Amount (₹) 10,000 60 6,00,000 Actual Quantity (Meter) Price (₹) Amount (₹) 11,400 58 6,61,200 Material Cost Variance = (SQ × SP – AQ × AP) = 6,00,000 – 6,61,200 = 61,200 (A) Material Price Variance = (SP – AP) AQ = (60 – 58) 11,400 = 22,800 (F) Material Usage Variance = (SQ – AQ) SP = (10,000 – 11,400) 60 = 84,000 (A) (ii) Variable Overheads variances Variable overhead cost Variance = Standard variable overhead - Actual Variable Overhead = (10,000 units × 2 hours × ₹ 10) – 2,24,400 = 24,400 (A) Variable overhead Efficiency Variance = (Standard Hours – Actual Hours) × Standard Rate per Hour Let Actual Hours be 'X', then: (20,000 – X) × 10 = 4,000 (A) 2,00,000 - 10X = - 4,000 X = 2,04,000 ÷ 10 Therefore, Actual Hours (X) = 20,400 Variable overhead Expenditure Variance = Variable Overhead at Actual Hours - Actual Variable Overheads = 20,400 × ₹ 10 – 2,24,400 = 20,400 (A) (iii) Labour variances Budget Hours Rate (₹) Amount (₹) 2 20 40 Std. for actual Hours Rate (₹) Amount (₹) 20,000 20 4,00,000 Actual Hours Rate (₹) Amount (₹) 20,400 22* 4,48,800 *Actual Rate = 4,48,800 ÷ 20,400 hours = 22 Labour Cost Variance = (SH × SR) – (AH × AR) = 4,00,000 – 4,48,800 = 48,800 (A) Labour Rate Variance = (SR – AR) × AH = (20 – 22) × 20,400 = 40,800 (A) Labour Efficiency Variance = (SH – AH) × SR = (20,000 – 20,400) × 20 = 8,000 (A)