For
questions and answers, email theotherwomaninmarriage@gmail.com
Here is the question of the Variance for those who don't have the text book.
QUESTION:
BBC Manufacturing company produces a single product, which
is called Paper X. The product requires
a single operation, and the standard cost for this operation is presented in
the following standard cost card.
Standard Cost card for product Paper X
N
DIRECT MATERIALS:
2kg of A@N10 per kg 20.
1kg of B@N10 per kg1 5.00
Direct labour (3hours at N3 per hour) 27.0
Variable overhead (3 hours at N2/direct labour hr) 6.00
Total Standard Variable Cost 68.00
Standard contribution margin 20.00
Standard selling price 88.00
BBC Ltd plans to produce 10,000 units of paper X in the month of April,
and the budgeted costs based on the information contained in the standard cost
card are as follows:
Budged based on the above standard costs and an output of 10,000
N000
Sales (10,000 units of Paper X at N88/unit) 880
Dire3ct Materials:
A: 20,000 kg at N9 per kg 200
B: 10,000 kg at N15 per kg 150
350
Direct labour (30,000 hourrs at N9 per hrs) 270
Variable Overheads (30,000 hrs at N2/direct labour hour) 60
680
Budgeted contribution 200
Fixed overheads 120
Budgeted profit 80
Annual budgeted fixed overheads are N1,440,000 And are assumed to be
incurred evenly throughout the year.
The company uses a variable costing system for internal profit
measurement purpose.
N000 N000
Sales (9000 units at N90) 810
Direct Materials:
A: 19,000 kg at N11 per kg 209
B: 10,100 kg at N14 per kg 141.400
Direct labour (28,500 hrs at N9.60/hr) 273.600
Variable overheads 52 676
Contribution 134
Fixed overheads 116
Profit 18
Manufacturing overhead are charged to production on the basis of direct
labour hours. Actual production and
sales for the period were 9,000 units.
SOLUTION:
MPV = Material Price variance. Here is the formula:
MPV(A) = (SP – AP) X AQ
EXPLANATION:
We have material A and material B: That is why we have this
formula as MPV (A). SP is standard
price, AP is actual price and AQ is actual quantity. What this means is that. A mudu of gari is sold for N200 as a standard
price, you might get it at N250 or N180 when you get to the market. This price that you bought the gari finally
is known as the actual price. While
Actual quantity is the quantity you finally got or bought due to some
circumstance.
So now let’s solve for MPV (A)
MPV(A) = (SP – AP) X AQ
MPV (A) = (10-11) x 19,000.
N19,000Adv
EXPLANATION
N10 is the standard price, pls read the question again if
you are confused. N11 is the actual
price while 19,000 is the actual quantity.
I picked all the figures from the question. Now after solving, if you have minus sign, it
means adverse so you don’t need to write minus rather you write adverse – Adv
for short. But if you have positive
figure, then you have FV. That is
favourable. Now let’s solve for Material B.
MPV (B) = (SP – AP) X
AQ
Note: Look at the
question for material B figures.
MPV(B) = (SP – AP) X AQ
MPV (B) = (15-14) x 10,100.
MPV(B)= N10,100Fv
I don’t need to explain this because, it is the same thing
with the first one we solved. It just that the figures are just different. For example if Material A is Gari, and
Material B is yam, they must have different prices.
Now let’s calculate for MUV(A). Material Usage Variance. This
will enable us know if the gari we bought was used properly. Variance means difference or
differentials. Here is the formula.
MUV(A) =
(SQ-AQ) x SP
What this means is that, the one mudu of gari I bought, how
was it used. is the standard quantity
you used is less or more (that is the actual quantity). That is what we are calculating to know.
So let’s go on:
MUV(A) =
(SQ-AQ) x SP
MUV (A) = (18,000 – 19,000) x 10
MUV (A) = 10,000Adv
Here we have workings
to show:
SQ is not given, but we got it by calculating 9000 x 2kg =
18,000kg.
The 9,000 is from…………………………………read the question. While the 2kg is from ……………….. also from the
question.
Now let’s calculate for MUV (B)
MUV(B) =
(SQ-AQ) x SP
MUV (B) = (9,000 – 10,000) x 15
MUV (B) = 16,500Adv
Workings:
Same 9000 but multiply by 1kg. 9000 x 1kg = 9000kg. Please, read the
question and you will see where this figure is from.
Now Material Cost Variance.
Which is MCV. This is
simple. Here is the formula: MPV + MUV.
Just add the figures of MPV and MUV for material A. Then also for material B.
Here is it.
MCV(A) = (MPV + MUV)
MCV (A)= 19,000+10,000 = 29,000Adv
Remember the figures you got for MPV(A) and MUV (A)? That is
what we brought substituted.
If your answer is Adv meaning negative, you don’t need to
put the negative sign or if you have FV which is positive, you don’t need to
put the positive sign but FV. So the above answers were adv both. Meaning
negative both. That is why when we add them together, we got 29,000Adv.
Now let’s solve MCV
(B)
MCV(B) = (MPV + MUV)
MCV (B)= 10,100+16,500 = 6,400Adv
The reason for this answer is
that 10,100 was Fv that means positive or favourable while 16,500 was negative
or adverse. So, when you add them this
is what you get. 10,000 +-16,500 = -6,400.
But because we don’t need to put those sign, that is why I replaced them
with Adv for negative or adverse.
Next, we are calculating for LRV Labour Rate Variance:
LRV = (SR-AR) X AHU
SR is Standard Rate, AR is Actual Rate while AHU is Actual
Hour Used.
LRV = (9-9.60)x 28,500
LRV = N17,100Adv
Again, read the question and see where the figures were
picked from the Direct labour.
Next is LEFFV = Labour Efficiency Variance:
LEFFV = (SH-AH) x SR
LEFFV = (27,000-28,500)x 9
LEFFV = 13,500Adv
Workings for this: The standard hours was not given so LEFFV:
SH=9,000x3hr = 27,000. That is how we got the 27,000 above. The 28,500 is in the question. That is the
Actual Hours used.
Next is to calculate for Labour Cost Variance (LCV).
LCV = (LRV + LEFFV)
LCV = (17,100 + 13,500)
LCV = N30,600 Adv
Variable Overhead Rate Variance (VORV):
VOHRV= (SR-AR) X AH
VOHRV= (2-52,000/28,500) X 28,500
VOHRV=5000F
Workings:
52,000/28,500 = 1.824….. put the whole figure – don’t approximate.
Next is Variable Efficiency Variance (VEFFV)
(VEFFV) = (SH-AH) x SR
(VEFFV) = (27,000-28,500) x 2
(VEFFV) = 3,000 Adv
Next is Variable Overhead Cost Variance (VOHCV).
VOHCV = (VOHRV +VEFFV)
VOHCV = (5000 +3,000)
VOHCV = 2,000Fv
Lastly, we have to compute for fixed overhead Variance:
Here is the formula:
Budged Fixed Overhead – Actual Fixed Overhead:
120,000-116,000
Fixed Overhead Variance =4,000Fv
Now, without all this long English or explanation, this is
how the solving should be below:
SOLUTION:
MPV = Material Price variance. Here is the formula:
MPV(A) = (SP – AP) X AQ
MPV (A) = (10-11) x 19,000.
N19,000Adv
MPV (B) = (SP – AP) X
AQ
MPV(B) = (SP – AP) X AQ
MPV (B) = (15-14) x 10,100.
MPV(B)= N10,100Fv
MUV(A) =
(SQ-AQ) x SP
MUV (A) = (18,000 – 19,000) x 10
MUV (A) = 10,000Adv
MUV(B) =
(SQ-AQ) x SP
MUV (B) = (9,000 – 10,000) x 15
MUV (B) = 16,500Adv
MCV(A) = (MPV + MUV)
MCV (A)= 19,000+10,000 = 29,000Adv
MCV(B) = (MPV + MUV)
MCV (B)= 10,100+16,500 = 6,400Adv
LRV = (SR-AR) X AHU
LRV = (9-9.60)x 28,500
LRV = N17,100Adv
Next is LEFFV = Labour Efficiency Variance:
LEFFV = (SH-AH) x SR
LEFFV = (27,000-28,500)x 9
LEFFV = 13,500Adv
LCV = (LRV + LEFFV)
LCV = (17,100 + 13,500)
LCV = N30,600 Adv
Variable Overhead Rate Variance (VORV):
VOHRV= (SR-AR) X AH
VOHRV= (2-52,000/28,500) X 28,500
VOHRV=5000F
Next is Variable Efficiency Variance (VEFFV)
(VEFFV) = (SH-AH) x SR
(VEFFV) = (27,000-28,500) x 2
(VEFFV) = 3,000 Adv
Next is Variable Overhead Cost Variance (VOHCV).
VOHCV = (VOHRV +VEFFV)
VOHCV = (5000 +3,000)
VOHCV = 2,000Fv
Lastly, we have to compute for fixed overhead Variance:
Here is the formula:
Budged Fixed Overhead – Actual Fixed Overhead:
120,000-116,000
Fixed Overhead Variance =4,000Fv
Note: Your comments will be appreciated on the blog. Just say something
as regard the lecture or the material you just viewed.
No comments:
Post a Comment