ABC Manufacturing Ltd. is a medium-sized manufacturing company engaged in the production of a single industrial component used in engineering…

(A) Prepare the following budgets: 1. Monthly production budget for the quarter January to March, 2025. (Quantitative) Particulars Jan Feb Mar April Budgeted Sales 12,000 13,500 15,000 16,500 Add: Closing Stock (25% of next month sales) 3,375 3,750 4,125 4,250 Total Requirement 15,375 17,250 19,125 20,750 Less: Opening Stock 3,000 3,375 3,750 4,125 Budgeted Production 12,375 13,875 15,375 16,625 Total Budgeted Production (Q1) = 12,375 + 13,875 + 15,375 = 41,625 units 2. Monthly raw material consumption quantity budget for January to April, 2025. Month Output (Units) Material A (5 kg/unit) Material B (4 kg/unit) January 12,375 61,875 49,500 February 13,875 69,375 55,500 March 15,375 76,875 61,500 April 16,625 83,125 66,500 Total (Q1) 2,08,125 1,66,500 3. Materials purchase quantity budget for the first quarter of the year 2025. Material A (kg) Particulars Quantity Material required for production 2,08,125 Add: Closing Stock (60% of April requirement = 83,125 × 60%) 49,875 Total Requirement 2,58,000 Less: Opening Stock 25,000 Purchase Quantity 2,33,000 kg Material B (kg) Particulars Quantity Material required for production 1,66,500 Add: Closing Stock (60% of April requirement = 66,500 × 60%) 39,900 Total Requirement 2,06,400 Less: Opening Stock 18,000 Purchase Quantity 1,88,400 kg (B) Calculate the following variances for the quarter ended 31st March, 2025: Working Data Standard Quantity for actual output (42,000 units): Material A = 42,000 × 5 = 2,10,000 kg Material B = 42,000 × 4 = 1,68,000 kg Material Cost Variance Statement Particulars Material A (₹) Material B (₹) Total (₹) (a) Std Price × Std Qty 12 x 2,10,000 = 25,20,000 18 x 1,68,000 = 30,24,000 55,44,000 (b) Std Price × Actual Qty 12 x 2,10,000 = 25,20,000 18 x 1,65,000 = 29,70,000 54,90,000 (c) Actual Cost 12.5 x 2,10,000 = 26,25,000 18.40 x 1,65,000 = 30,36,000 56,61,000 1. Material Cost Variance Material A = (25,20,000 - 26,25,000) = 1,05,000 (A) Material B = (30,24,000 - 30,36,000) = 12,000 (A) Total = 1,17,000 (A) 2. Material Price Variance Material A = (12 - 12.50) x 2,10,000 = 1,05,000 (A) Material B = (18 - 18.40) x 1,65,000 = 66,000 (A) Total = 1,71,000 (A) 3. Material Usage Variance Material A = (2,10,000 - 2,10,000) x 12 = Nil Material B = (1,68,000 - 1,65,000) x 18 = 54,000 (F) Total = 54,000 (F) Calculation of Labour Cost Variances: Working Notes Budgeted output (Q1) = 41,625 units Standard labour hours = 41,625 × 0.8 = 33,300 hours Standard rate per hour = Budgeted direct labour cost / Budgeted direct labour hours = ₹15,36,000 / 33,300 = ₹46.13 (approx.) Standard hours for actual output = 42,000 × 0.8 = 33,600 hours Actual rate per hour = ₹17,85,000 / 35,000 = ₹51 4. Labour Cost Variance = (Standard Rate × Standard Hours) – Actual Cost = (46.13 × 33,600) – 17,85,000 = 15,49,968 – 17,85,000 = ₹2,35,032 (A) 5. Labour Rate Variance = Actual Hours × (Standard Rate - Actual Rate) = 35,000 × (46.13 – 51) = 35,000 × (-4.87) = ₹1,70,450 (A) 6. Labour Efficiency Variance = Standard Rate × (Standard Hours – Actual Hours) = 46.13 × (33,600 – 35,000) = 46.13 × (-1,400) = ₹64,582 (A)