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9.3

The document outlines the calculation of variances for a production scenario, comparing standard and actual costs for materials and labor. The total variance is Tk.263,000 favorable, while material variances show a total unfavorable variance of Tk.2,000 and labor variances indicate a total favorable variance of Tk.265,000. Key variances include favorable material price variance of Tk.33,000 and favorable labor efficiency variance of Tk.340,000.

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Abdullah Al Rafi ,141438
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9.3

The document outlines the calculation of variances for a production scenario, comparing standard and actual costs for materials and labor. The total variance is Tk.263,000 favorable, while material variances show a total unfavorable variance of Tk.2,000 and labor variances indicate a total favorable variance of Tk.265,000. Key variances include favorable material price variance of Tk.33,000 and favorable labor efficiency variance of Tk.340,000.

Uploaded by

Abdullah Al Rafi ,141438
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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9.

3 Solution:
Calculation of Variances
Given Data:
- Standard Cost per Unit (Materials): 10 kg @ Tk.35 per kg
- Standard Cost per Unit (Labor): 3 hours @ Tk.680 per hour
- Actual Cost per Unit (Materials): 11 kg @ Tk.32 per kg
- Actual Cost per Unit (Labor): 2.5 hours @ Tk.710 per hour
- Total Units Produced: 1000 units
1. Total Variance
a) Standard Cost (Total):
Standard Material Cost = 10 kg/unit × Tk.35 × 1000 units = Tk.350,000
Standard Labor Cost = 3 hours/unit × Tk.680 × 1000 units = Tk.2,040,000
Total Standard Cost = Tk.350,000 + Tk.2,040,000 = Tk.2,390,000
b) Actual Cost (Total):
Actual Material Cost = 11 kg/unit × Tk.32 × 1000 units = Tk.352,000
Actual Labor Cost = 2.5 hours/unit × Tk.710 × 1000 units = Tk.1,775,000
Total Actual Cost = Tk.352,000 + Tk.1,775,000 = Tk.2,127,000
c) Total Variance:
Total Variance = Standard Cost - Actual Cost
= Tk.2,390,000 - Tk.2,127,000 = Tk.263,000 (Favorable)
2. Material Variances
a) Material Price Variance:
Material Price Variance = (Standard Price - Actual Price) × Actual Quantity Used
= (Tk.35 - Tk.32) × (11 × 1000)
= Tk.33,000 (Favorable)
b) Material Usage Variance:
Material Usage Variance = (Standard Quantity Allowed - Actual Quantity Used) × Standard
Price
= (10 × 1000 - 11 × 1000) × Tk.35
= -Tk.35,000 (Unfavorable)
c) Total Material Variance:
Total Material Variance = Material Price Variance + Material Usage Variance
= Tk.33,000 + (-Tk.35,000)
= -Tk.2,000 (Unfavorable)
3. Labor Variances
a) Labor Rate Variance:
Labor Rate Variance = (Standard Rate - Actual Rate) × Actual Hours Worked
= (Tk.680 - Tk.710) × (2.5 × 1000)
= -Tk.75,000 (Unfavorable)
b) Labor Efficiency Variance:
Labor Efficiency Variance = (Standard Hours Allowed - Actual Hours Worked) × Standard
Rate
= (3 × 1000 - 2.5 × 1000) × Tk.680
= Tk.340,000 (Favorable)
c) Total Labor Variance:
Total Labor Variance = Labor Rate Variance + Labor Efficiency Variance
= -Tk.75,000 + Tk.340,000
= Tk.265,000 (Favorable)
4. Summary of Variances
Variance Amount (Tk.) Type
Total Variance 263,000 Favorable
Material Price Variance 33,000 Favorable
Material Usage Variance -35,000 Unfavorable
Total Material Variance -2,000 Unfavorable
Labor Rate Variance -75,000 Unfavorable
Labor Efficiency Variance 340,000 Favorable
Total Labor Variance 265,000 Favorable

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