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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