Question

You are required to Compute all variances for a product X, the standard cost data per

unit of output for which are as follows:

Direct material 20kg @ Rs.10per kg

Direct labour 12 hours at Rs. 5.50 per hour

Variable overheads 12 hours at Rs. 10 per hour

Fixed overheads Rs.9,00,000 per month based on a normal

volume of 60,000 direct labour hours

Selling price Rs. 600 per unit

The costs incurred and other relevant information for the month of June2020 are as

under

Direct material used 1,00,000 kg at a cost of Rs. 10,50,000

Direct wages paid Rs. 3,10,000 for 62,000 hours worked

Overheads Rs.15,26,000 out of which a sum of Rs.9,40,000

is Fixed

Actual output 4,800 units sold for Rs. 28,32,000

Assume no stocks of work-in-progress or finished goods at the beginning or at the end

of the month.
​

Answer 1

Explanation:

Sohan Manufacturing Co. Ltd., furnished the following information:

Standard

Material for 70 kg finished products: 100 kg

Price of materials: ` 1 per kg.

Actual

Output: 2,10,000 kg

Material used: 2,80,000 kg

Cost of material: ` 2,52,000

Calculate

a. Material Usage Variance

b. Material Price Variance

c. Material Cost Variance

Answer:

a. Material Usage Variance ` 20,000 (Fav)

b. Material Price Variance ` 28,000 (Fav)

c. Material Cost Variance ` 48,000 (Fav)