ABC Ltd. had prepared the following estimation for the month of April Quantity Rate (2) Amount (2) 800 kg. 45.00 36.000 600 kg. 30.00 18,000 1,000 hours 37.50 37,500 800 hours 22.00 17,600 Material-A Material-B Skilled labour Unskilled labour Normal loss was expected to be 10% of total innut materials and an idlo labour time
ABC Ltd. had prepared the following estimation for the month of April Quantity Rate (2) Amount (2) 800 kg. 45.00 36.000 600 kg. 30.00 18,000 1,000 hours 37.50 37,500 800 hours 22.00 17,600 Material-A Material-B Skilled labour Unskilled labour Normal loss was expected to be 10% of total innut materials and an idlo labour time
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:ABC Ltd. had prepared the following estimation for the month of April.
Quantity Rate (3) Amount (3)
800 kg.
45.00
36.000
600 kg.
30.00
18,000
1,000 hours
37.50
37,500
800 hours
22.00
17,600
Material-A
Material-B
Skilled labour
Unskilled labour
Normal loss was expected to be 10% of total input materials and an idle labour time
of 5% of expected labour hours was also estimated.
At the end of the month the following information has been collected from the cost
accounting department:
The company has produced 1,480 kg. finished product by using the followings:
W
Quantity
Rate (3) Amount (R)
43.00
38,700
32.50
21,125
35.50
42,600
23.00
19,780
Material-A
Material-B
Skilled labour
Unskilled labour
900 kg.
650 kg.
1,200 hours
860 hours
You are required to calculate:
(a) Material Cost Variance;
(b) Material Price Variance
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