### STANDARD COSTING

Method one of reading:-

Material:-

SP * SQ SP * AQ SP * RSQ AP * AQ

(1) (2) (3) (4)

a) Material cost variance = (1) – (4)

b) Material price variance = (2)–(4)

c) Material usage variance = (1) – (2)

d) Material mix variance = (3) – (2)

e) Material yield variance = (1) –(3)

Labour :-

SR*ST SR*AT (paid) SR*RST AR*AT SR*AT(worked)

(1) (2) (3) (4) (5)

a) Labour Cost variance = (1) – (4)

b) Labour Rate variance = (2) – (4)

c) Labour Efficiency variance = (1) – (2)

d) Labour mix variance = (3) – (5)

e) Labour Idle time variance = (5) – (2)

Variable Overheads cost variance :-

SR * ST SR * AT AR * AT

(1) (2) (3)

a) Variable Overheads Cost Variance = (1) – (3)

b) Variable Overheads Expenditure Variance = (2) – (3)

c) Variable Overheads Efficiency Variance = (1) – (2)

[Where: SR =Standard rate/hour = Budgeted variable OH

Budgeted Hours ]

Fixed Overheads Cost Variance:-

SR*ST SR*AT(worked) SR*RBT SR*BT AR*AT(paid)

(1) (2) (3) (4) (5)

a) Fixed Overheads Cost Variance = (1) – (5)

b) Fixed Overheads Budgeted Variance = (4) – (5)

c) Fixed Overheads Efficiency Variance = (1) – (2)

d) Fixed Overheads Volume Variance = (1) – (4)

e) Fixed Overheads Capacity Variance = (2) – (3)

f) Fixed Overheads Calendar Variance = (3) – (4)

Sales value variance:-

Budgeted Price*BQ BP*AQ BP*Budgeted mix AP*AQ

(1) (2) (3) (4)

a) Sales value variance = (4)–(1)

b) Sales price variance = (4) – (2)

c) Sales volume variance = (2) – (1)

d) Sales mix variance = (2) – (3)

e) Sales quantity variance = (3) – (1)

Note :-

i) Actual margin per unit (AMPU) = Actual sale price – selling cost per unit

ii) Budgeted margin per unit (BMPU) = Budgeted sale price – selling price per unit

Sales margin variance :-

BMPU*BQ BMPU*AQ BMPU*Budgeted mix AMPU*AQ

(1) (2) (3) (4)

a) Sales margin variance = (4) – (1)

b) Sales margin price variance = (4) – (2)

c) Sales margin volume variance = (2) – (1)

d) Sales margin mix variance = (2) – (3)

e) Sales margin quantity variance = (3) – (1)

Control Ratio :-

1) Efficiency Ratio = Standard hours for actual output * 100

Actual hours worked

2) Capacity Ratio = Actual Hours Worked * 100

Budgeted Hours

3) Activity Ratio = Actual hours worked * 100

Budgeted Hours

Verification: Activity Ratio = Efficiency * Capacity Ratio

Method two of reading:-

Material:-

a) Material cost variance = SC – AC = (SQ*AQ) – (AQ*AP)

b) Material price variance = AQ (SP – AP)

c) Material usage variance = SP (SQ – AQ)

d) Material mix variance = SP (RSQ – AQ)

e) Material yield variance = (AY – SY for actual input) Standard material cost per

unit of output

f) Material revised usage variance (calculated instead of material yield variance)

= [standard quantity – Revised standard

for actual output quantity ] * Standard price

Labour :-

a) Labour Cost variance = SC – AC = (SH*SR) – (AH*AR)

b) Labour Rate variance = AH (SR - AR)

c) Labour Efficiency or time variance = SR (SH –AH)

d) Labour Mix or gang composition Variance = SR(RSH-AH)

e) Labour Idle Time Variance = Idle hours * SR

f) Labour Yield Variance = [Actual Output – Standard output for actual input]

* Standard labour cost/unit of output

g) Labour Revised Efficiency Variance (instead of LYV) =

[Standard hours for actual output – Revised standard hours] * Standard rate

Notes :- i) LCV = LRV + LMV + ITV + LYV

ii) LCV = LRV + LEV + ITV

iii) LEV = LMV, LYV (or) LREV

Overhead variance :- (general for both variable and fixed)

a) Standard overhead rate (per hour) = Budgeted Overheads

Budgeted Hours

b) Standard hours for actual output = Budgeted hours * Actual Output

Budgeted output

c) Standard OH = Standard hrs for actual output * Standard OH rate per hour

d) Absorbed OH = Actual hrs * Standard OH rate per hour

e) Budgeted OH = Budgeted hrs * Standard OH rate per hour

f) Actual OH = Actual hrs * Actual OH rate per hour

g) OH cost variance = Absorbed OH – Actual OH

Variable Overheads variance :-

a) Variable OH Cost Variance = Standard OH – Actual OH

b) Variable OH Exp. Variance = Absorbed OH – Actual Variable OH

c) Variable OH Efficiency Variance = Standard OH – Absorbed OH

= [Standard hours for – Actual * Standard rate

actual output hours] for variable OH

Fixed Overheads variance :-

a) Fixed OH Cost Variance = Standard OH – Actual OH

b) Fixed OH expenditure variance = Budgeted OH – Actual OH

c) Fixed OH Efficiency Variance = Standard OH (units based) – Absorbed OH

(Hours based)

d) Fixed OH Volume Variance = Standard OH – Budgeted OH

= [Standard hrs for – Budgeted * standard rate

actual output hours ]

e) Fixed OH capacity variance = Absorbed OH–Budgeted OH

f) Fixed OH Calendar Variance = [Revised budgeted hrs – Budgeted hrs]

* Standard rate/hrs

Note:- When there is calendar variance capacity variance is calculated as follows :-

Capacity variance = [Actual hours – Revised * Standard

(Revised) Budgeted hrs] rate/hour

Verification :-

i) variable OH cost variance = Variable OH Expenditure variance

+ Variable OH Efficiency variance

ii) Fixed OH cost variance = Fixed OH Expenditure variance + Fixed OH volume

variance

iii) Fixed OH volume variance = Fixed OH Efficiency variance + Capacity variance

+ Calander variance

Sales variances :-

Turnover method (or) sales value method :-

a) Sales value variance = Actual Sales – Budgeted Sales

b) Sales price variance = [Actual Price – Standard price] * Actual quantity

= Actual sales – standard sales

c) Sales volume variance = [Actual-Budgeted quantity] *Standard price

= Standard sales – Budgeted sales

d) Sales mix variance = [Actual quantity – Revised standard quantity] * Standard

price

= Standard sales – Revised sales

e) Sales quantity variance = [Revised standard variance – Budgeted quantity]

* Standard price

= Revised Standard sales – Budgeted sales

Profit method:-

a) Total sales margin variance = (Actual Profit–Budgeted price)

= {Actual quantity * Actual profit per unit}-

{Budgeted quantity * Standard profit per unit}

b) Sales margin price variance=Actual profit–Standard profit

= {Actual Profit per unit – Standard profit per unit} * Actual quantity of sales

c) Sales margin volume variance = Standard profit – Budgeted Profit

= {Actual quantity – Budgeted quantity} * Standard profit per unit

d) Sales margin mix variance = Standard profit – Revised Standard profit

= {Actual quantity – Revised standard quantity} * Standard profit per unit

e) Sales margin quantity variance = Revised standard profit - Budgeted profit

= {Revised standard quantity – Budgeted quantity} * Standard profit per unit

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