Page 233 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes Problem 2:
Given the following particulars, calculate the labour variances.
Standard hours : 40 @ ` 3 per hour
Actual hours : 50 @ ` 4 per hour

Solution:
(a) Labour Cost Variance = (ST × SR) – (AT × AR)
LCV = (40 × 3) – (50 × 4) = 120 – 200
LCV = ` 80 (Adverse)

(b) Labour Rate Variance = AT (SR – AR)
LRV = 50 (3 – 4) = 50 × 1
LRV = ` 50 (Adverse)
(c) Labour Efficiency Variance = SR (ST – AT)

LEV = 3 (40 – 50) = 3 × 10
LEV = ` 30 (Adverse)
Verification:
LCV = LRV + LEV

` 80 (A) = ` 50 (A) + ` 30 (A)
Problem 3:
Find out different labour variances.
Standard Actual

Output 1,000 units 1,200 units
Rate of payment @ ` 6 per unit Wages paid with bonus ` 8,000
Time taken 50 hours 40 hours
Solution:

(1) Calculation of Standard Rate and Actual Rate

1,000 6
SR = = ` 120 per hour
50
8,000
AR = = ` 200 per hour
40
(2) Calculation of Standard Hours for 1,200 Units Actually Produced:
50
SH =  1,200 = 60 hours
1,000
(a) Labour Cost Variance = (ST × SR) – (AT × AR)
LCV = (60 × 120) – (40 × 200)
LCV = 7,200 – 8,000

LCV = ` 800 (Adverse)

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