The document discusses standard costing and variance analysis. It provides examples of calculating variances for labor costs, overhead costs, and flexible budgeting at different activity levels. Specifically:
1) Standard costing involves preparing standard costs and comparing them to actual costs to analyze variances and their causes.
2) Variances measure the difference between standard and actual costs and can be favorable or unfavorable.
3) Examples show how to calculate variances for labor costs, overhead costs, and prepare flexible budgets at different activity levels.
Budgeting and Budgetary control – Standard costing and variance analysis: Cost control and cost reduction:
Introduction to cost control – cost reduction- fields covered by cost reduction- tools and techniques for cost reduction
Budgeting and Budgetary control – Standard costing and variance analysis: Cost control and cost reduction:
Introduction to cost control – cost reduction- fields covered by cost reduction- tools and techniques for cost reduction
This presentation covers what standard costing is, its uses and limitations. Also included is a small case solved case study for better understanding of the topic.
Standard costing deals with setting up of cost standards for different activities and their periodic analysis. Such costs almost always differ from actual cost due to unpredictable factors.
Resentation for PeopleSoft SCM users group comparing and Standard and Actual Costing for Production Inventories using PeopleSoft Cost Managment functionality.
This presentation covers what standard costing is, its uses and limitations. Also included is a small case solved case study for better understanding of the topic.
Standard costing deals with setting up of cost standards for different activities and their periodic analysis. Such costs almost always differ from actual cost due to unpredictable factors.
Resentation for PeopleSoft SCM users group comparing and Standard and Actual Costing for Production Inventories using PeopleSoft Cost Managment functionality.
Process costing explained with examples free of cost .It is for students of managerial accounting ,read this to quickly go through process costing.
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Contract Costing is a difficult one for accounting.
Basics of which, can be seen in this PPT. I hope it will help to understand what is Contract Costing and how its accounting can be done. Please Like if it proves to be helpful for you.
This presentation covers Accounting of Services and Operations like - Cinema Hall, Canteen, Hospital, Transport, Costing etc.
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2. Standard Costing & Variance
Analysis
• Standard costing involves the preparation
and use of standard costs, their comparison
f p
with actual costs and the analysis of
variances to their causes and points of
p f
incidence
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3. Analysis of Variance
• V i
Variance is the difference between Standard
i h diff b S d d
cost and Actual cost (V=S-A)
• Variance can be Favourable or Unfavourable
• Variance is computed and is analysed for its
p y
causes and assigning responsibilities
• Variance is computed with cost components:
1. Direct Material
2.
2 Direct Labour
3. Overheads narain@fms.edu
6. Illustration
A gang of workers usually consists of 10 skilled, 5 semi-
skilled and 5 unskilled men in a factory. They are paid
at standard h l rate of R 1 25 R 0 80 and R
t t d d hourly t f Rs. 1.25, Re. 0.80 d Re.
0.70 respectively. In a normal working week of 40
hours the gang is expected to produce 1 000 units
1,000 units.
In a certain week, the gang consisted of 13 skilled, 4 semi-
skilled and 3 unskilled men. Actual wages paid at the
rates of Rs. 1.20, Re. 0.85 & Re. 0.65 respectively. Two
hours were lost due to abnormal idle time and 960 units
were produced. Compute labour variances.
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7. Solution
• Labour Cost Variance = Rs. 70 (A)
• Labour Rate Variance = Rs. 24 (F)
L b R t V i R
• Labour Time Variance = Rs. 94 (A)
• Idle Time Variance = Rs. 43.1 (A)
• Labour Efficiency Variance = Rs. 50.9 (A)
• Labour Mix Variance = Rs. 58.9 (A)
• Labour Yield Variance = Rs. 8 (F)
L b Yi ld V i R
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9. Illustration
In a factory the standard units of production for the year
were fixed at 1,20,000 units and overheads were
estimated t b Fi d – R 13080 and V i bl – R
ti t d to be: Fixed Rs. d Variable Rs.
6,720.
Actual production during April of the year was 8 000 8,000
units. The actual overheads amounted to: Fixed – Rs.
1,305 and Variable – Rs. 562.
Find the overhead variances.
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10. Solution
• Overhead Cost Variance = Rs. 547 (A)
• Variable
V i bl O/h Cost Variance = Rs. 114 (A)
C tV i R
• Fixed O/h Cost Variance = Rs. 433 (A)
• Fixed O/h Budget Variance = Rs. 215 (A)
• Fixed O/h Volume Variance = Rs. 218 (A)
• Variable O/h Spending Variance = Rs. 2 (A)
• Variable
V i bl O/h Effi i
Efficiency Variance = Rs. 112 (A)
V i R
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12. Budgetary Control
Budgetary control involves the establishment of
g y f
budgets relating to the responsibilities of
executives to the requirements of a policy,
q f p y
and the continuous comparison of actual
with budgeted results, either to secure by
g y
individual action the objective of that policy
or to provide a basis for its revision.
p f
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14. Types of Budgeting
• Zero base budgeting
g g
• Fixed and Flexible budgeting
• Performance budgeting
• Responsibility Accounting
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15. Illustration
With the following data for a 60% activity,
activity
prepare a budget at 80% and 100% activity
Production at 60% capacity – 600 units
Material Rs. 100 per unit
Labour Rs. 40 per unit
Expenses Rs. 10 p unit
p per
Factory Expenses Rs. 40,000 (40% fixed)
Administration expenses Rs. 30,000 (60% fixed)
Rs 30 000
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16. Flexible Budget
Solution
for the department ……
Capacity Output (units)
Particulars
600 800 1000
Material - Rs. 100/- 60,000 80,000 100,000
Labour - Rs. 40/- 24,000 32,000 40,000
Expenses - Rs. 10/
Rs 10/- 6,000
6 000 8,000
8 000 10,000
10 000
Factory Expenses - Rs. 40/- 24,000 32,000 40,000
Administration Expenses - Rs. 20/- 12,000 16,000 20,000
Total Variable Costs 126,000
126 000 168,000
168 000 210,000
210 000
Fixed Costs:
Factory Expenses (40%) 16,000 16,000 16,000
Administration Expenses (60%)
Ad i i t ti E 18,000
18 000 18,000
18 000 18,000
18 000
Total Costs 160,000
narain@fms.edu 202,000 244,000