# Problem 1

For a product the following data are given:

Standards per unit of product:
Direct material 24 Kg. @ 25 per kg.
Direct labour 12 hours @ 6 per hour

Actual details for given financial period:
Output produced (units) : 4,200
Direct materials:
Purchased: 1,25,000 kg for 32,50,000
Issued to production: 1,05,000 kg
Direct labour: 52,800 hours worked for 3,30,000
There was no work – in- progress at the beginning or end of the period.
You are required to calculate the material and labour/labor variances. (Material Price variance should be based on issues to production)

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 2

LEGO Playware produces toys for national distribution. The management has recently established a standard cost system to control costs.
Estabished standard costs are:
 (i) Materials: 12 pieces per unit at 64 paise per piece. (ii) Labour: 2 hours per unit at 5.25 per hour.
During a month, the company produces 2,400 units of finished goods. Production information for the month is as follows:
 (a) Materials: 29,400 pieces at a total of 17,640 (b) Labour Costs : 26,000 (c) Direct- Labour hours worked were 5,000 (d) Inventories: Beginning of the month, nil; End of the month, nil
Required:
 (i) Computation of material and labour/labor variances. (ii) A brief explanation to management giving the significance of each variance.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 3

The following details relating to the product ‘RBT’ during a month are available. You are required to compute the materil and labour variances and also to reconcile the standard and the actual cost with the help of such variances. Standard cost per unit:
Materials 60 kgs @ 15 per kg,
Labour 240 hours @ 5.00 per hour

Actual cost for the month
Material 6,230 kgs. @ 16 per kg,
Labour 25,100 hours @ 5.20 per hour.
Actual production – 100 units.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 4

The standard cost card for a product shows as under :
Material cost - 6 kg. @ 12.50 = 75 per unit
Wages 12 hours @ 5 = 60.00 per unit The actuals which have emerged from business operations are as under :
Production : 8,000
Materials consumed - 46,500 kg @ 12.40 = 5,76,600.
Wages paid 98,000 hours @ 12 = 11,76,000
Caluculate appropriate material and labour variances.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ; LCV = ;
LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 5

The standard cost on ‘Material’ and ‘Labour’ for the making of a unit of certain product are estimated ad under :
Material : 75 kg. @ 12 per kg.
Labour : 16 hrs. @ 7.50 per hour.
On completion of the production of a unit, it was found that 78 kg. of material costing 13.25 per kg. has been consumed and that the time taken was 15 hours, the wage rate being 7.80 per hour.
You are required to (a) analyse material and labour variances and (b) indicate their significance.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 6

From the following records of METALLICA Ltd., you are required to compute the material and labour variances;
1 tonne of material input yields a standard output of 1 lakh units.
Number of employees is 150.
The standard wage rate per employee per day is 8
Standard price of material is 25 per kg.
Actual quantity of material issued by production department 10 tonnes.
Actual output is 9.5 lakh units.
Actual wage rate per day is 8.40.
Standard daily output per employee is 100 units.
Total number of days worked is 54.
Idle time paid for and included above is ½ day.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 7

STELLAR Ltd., turns out only one article, the prime cost standards for which have been established as follows;
 Per Completed Price Material – 8 lbs. @ 4.60 36.80 Labour – 6 Hours @ 6.20 37.20
The production schedule for a month required completion of 6,000 pieces. However, 6,180 pieces were actually completed.
Purchase for the month of July 1995 amounted to 30,000 lbs. of material at the total invoice price of 1,35,000.
Production records for the month of July,1995 showed the following actual results.
 Material requisitioned and used 25,700 lbs Direct labour – 15,150 hours 48,480

Calculate appropriate material and labour variances.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 8

In a factory the budgeted and actual figures of the cost of materials and direct labour incurred in the production during the month of January are as under:
Actual Budgeted
Units of Finished Goods Produced 90,000 1,00,000
Units of Finished Goods Produced 90,000 1,00,000
Materials:
Units 1,82,000 2,00,000
Cost of Materials per unit 0.52 0.50
Total Cost of Materials 94,640 1,00,000
Direct Labour Hours
(2 units of finished goods in one hour)
47,000 50,000
Wages 2.10 per hour 2.00 per hour
Total Direct Labour Cost 98,700 1,00,000

Calculate variances.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 9

From the following data of A Co.ltd. relating to budgeted and actual performance for the month of March 1987 compute the Direct Material and Direct Labour Cost variances.
Budgeted data for March:
 Units to be manufactured 1,50,000 Units of direct Material required (based on std.rates) 4,95,000 Planned Purchase of Raw Materials (units) 5,40,000 Average unit cost of Direct Material 8 Direct Labour Hours per unit of finished goods ¾ hr. Direct Labour Cost(total) 29,92,500
Actual data at the end of a month:
 Units actually manufactured 1,60,000 Direct Material Cost (purchase cost based on units actually issued) 43,41,900 Direct Material Cost (purchase cost based on units actually purchased) 45,10,000 Average unit cost of Direct Material 8.20 Total Direct Labour hours for the month 1,25,000 Total Direct Labour Cost for the month 33,75,000

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 10

   Input Kg.   Total Kg. Standard Actual 500 Material @ 39 per kg. 19,500 500 Material @ 42 per kg 21,000 Labour/Labor 4,000 hrs @ 1.50 per hour. 6,000 Labour/Labor 4,000 hrs @ 1.50 per hour. 6,000 Normal Loss 20 40 Actual Loss Output 480 25,500 460 27,000

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 11

For unit of product A, the standard date are below.
Material
5 kg. @ 40 per kg 200
Labour/Labor
40 hrs.@ 1.00 per hour 40
240
Actual Data
Actual production 100 units
Total
Material 490kg. @ 42 each 20,580
Labour 3960 hrs. @ 1.10 per hour 4,356
24,936

Calculate variances.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 12

TESCO Ltd. follows standard consting system and the following information is available for a month.
(a) Actual production - 1,500 kg.
Materials consumed Labour deployed
Type Quantity
(kg)
Rate
( per kg)
Worker Timeworked
(hours)
Rate
( per hour)
A 550 5.00 P 32 11.00
B 200 6.00 Q 14 9.00
C 350 2.00 R 20 11.00
D 400 2.00 S 10 18.00
(b) Details of standard materials and labour cost based on producton of 1,000 kgs are as under.
Consumption of Materials Deployment of Labour
Type Quantity
(kg)
Rate
( per kg)
Worker Timeworked
(hours)
Rate
( per hour)
A 400 4.00 P 20 10.00
B 100 5.00 Q 10 8.00
C 200 2.50 R 15 12.00
D 300 6.00 S 7 20.00

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 13

The following standards have been set to manufacture a product:
Direct Materials:
2 units of A at 4 per unit 8.00
3 units of B at 3 per unit 9.00
15 units of C at 1 per unit 15.00
32.00
Direct labour 3 hours (@ 8 per hour) 24.00
Total Standard Price Cost 56.00
The Company manufactured and sold 6,000 units of the product during the year. Direct Material Costs were as follows:
12,500 units of A at 4.40 per unit
18,000 units of B at 2.80 per unit
88,500 units of C at 1.20 per unit
The company worked 17,500 direct labour hours during the year. For 2,500 of these hours the company paid at 12 per hour while for the remaining the wages were paid at the standard rate.
Calculate Material and Labour Variances.

Solution
[TMCV = ; TMPV = ; TMUV/TMQV = ; TMMV = and TMYV/TMSUV = ;
LCV = ; LRPV = ; LEV/LUV = ; LITV = – LMV/LGCV = 0 and LYV/LSUV = ;]

# Problem 14

A Chemical Co gives you the following standard and actual data of its chemical No. 206. You are required to calculate variances.
Standard data Total   Actual data Total
kg   kg
450 of Mat. A @ 20/kg 9,000   450 @ 19/kg 8,550
360 of Mat. B @ 10/kg 3,600 12,600 360 @ 11/kg 3,960 12,510
810       810
2,400 skilled hours
@ 2/hr
4,800     2,400 hours
@ 2.25/hr
5,400
1,200 un-skilled hours
@ 1/hr
1,200 6,000   1,200 hours
@ 1.25/hr
1,500 6,900
90 Normal Loss     50 Actual Loss
720     18,600 760     19,410

Solution

# Problem 15

Standard   Actual
Input Material Per     Total Input per   Total
kg   kg kg kg
400 A @ 50 20,000   420 @ 45 18,000
200 B @ 20 4,000   240 @ 25 6,000
100 C @ 15 1,500 25,500 90 @ 15 1,350 26,250
700         750
Labour
100 Man hrs.
@ 2/hr.
200     120 hrs
@ 2.50/hr.
300
200 Women hrs.
@ 1.50/hr.
300 500   240 hrs
@ 1.60/hr.
384 684
25 Normal Loss     75 Actual Loss
675       26,000 675     26,934
From the above information calculate variances.

Solution

# Practice Problems

Author : The Edifier