Standard Costing and Budgetary Control CA

Standard Costing and Budgetary Control CA Past Years Exam Answers Answer to Q.1 (Nov, 2008) SP SQAO M 1 ` 6/kg. 500 kgs. = ` 3,000 SP AQ M 2 ` 6/kg. 450 kgs. = ` 2,700 AP AQ M 3 ` 8/kg. 450 kgs. = ` 3,600 Actual quantity consumed = 250 units 1.80 kgs. p.u. = 450 kgs. SQAO = 250 units 2 kgs. per unit = 500 kgs. DMCV = M 1 M 3 = 3,000 3,600 = ` 600 (A) DMUV = M 1 M 2 = 3,000 2,700 = ` 300 (F) DMPV = M 2 M 3 = 2,700 3,600 = ` 900 (A) Answer to Q.2 (May, 2009) Material price variance = ` 9,800 (A) (Standard Price Actual Price) (Actual Quantity) = 9,800 (` 40/kg. ` 42/kg).) (Actual Quantity) = 9,800 Solving, we get Actual Quantity = 4,,900 kgs. Hence, actual material consumed is 4,900 kgs. Answer to Q.3 (Nov, 2012) SR SHAO L 1 Skilled 45 2,340 = 1,05,300 Semi-skilled 30 720 = 21,600 Un-skilled 15 540 = 8,100 1,35,000 Actual Hours Paid (AHP) Skilled = 50 40 = 2,000 hrs. Semi-skilled = 30 40 = 1,200 hrs. Un-skilled = 20 40 = 800 hrs. Actual Hours Worked (AHW) Skilled = 50 38 =1,900 hrs. Semi-skilled = 30 38 = 1,140 hrs. Un-skilled = 20 38 = 760 hrs. SR RSH SR AHW AR AHP L 2 L 3 L 4 45 2,470 45 1,900 45 2,000 = 1,11,150 = 85,500 = 90,000 30 760 30 1,140 30 1,200 = 22,800 = 34,200 = 36,000 15 570 15 760 15 800 8,550 = 11,400 = 12,000 AR AHP L 5 50 2,000 = 1,00,000 35 1,200 = 42,000 10 800 = 8,000 Page No: 1.1

Revised Standard Hours (RSH) Total of AHW = 3,800 hrs. Budgeted Ratio = 65:20:15 Skilled = 2,470 hrs. Semi-skilled = 760 hrs. Un-skilled = 570 hrs. Budgeted Hours Per Unit of Output Budgeted hours Output Skilled Semi-skilled Un-skilled Total 2,000 units 65 40 = 2,600 hrs. 20 40 = 800 hrs. 15 40 = 600 hrs. 4,000 hrs. 1 unit 1.3 hrs. 0.4 hr. 0.3 hr. 2 hrs. SHAO = Actual Output Budgeted hours per unit Skilled 1,800 1.3 = 2,340 hrs. Semi-skilled 1,800 0.4 = 720 hrs. Un-skilled 1,800 0.3 = 540 hrs. Computation of Labour Cost Variances DLCV DLRV ITV DLEV DLMV DLYV Worker (L 1 L 5 ) (L 4 L 5 ) (L 3 L 4 ) (L 1 L 3 ) (L 2 L 3 ) (L 1 L 2 ) Skilled ` 5,300 (F) ` 10,000 (A) ` 4,500 (A) ` 19,800 (F) ` 25,650 (F) ` 5,850 (A) Semi-skilled ` 20,400 (A) ` 6,000 (A) ` 1,800 (A) ` 12,600 (A) ` 11,400 (A) ` 1,200 (A) Un-skilled ` 100 (F) ` 4,000 (F) ` 600 (A) ` 3,300 (A) ` 2,850 (A) ` 540 (A) ` 15,000 (A) ` 12,000 (A) ` 6,900 (A) ` 3,900 (F) ` 11,400 (F) ` 7,500 (A) Alternative Method of Calculating DLYV DLYV = (Standard cost per unit) (Actual Output Expected Output in Actual Input) ` 1,35, 000 3,800 hrs. = 1,800 Units - 1,800 Units = (` 75 p.u.) (1.800 Units 1,900 Units) = ` 7,500 (A) 2 hrs. p.u. Answer to Q 4 (May, 2012) Basic Calculations:- Standard OH Rate Per Unit ` 20 1) Time taken to produce per unit = = = 5 hrs. Standard OH Rate Per Hour ` 4 2) Segregation of semi-variable cost into Variable and Fixed Cost Difference in Total Cost ` 2,10,000 - ` 1,80,000 Variable Cost per unit = = Difference in Units 10,000 Units - 8,000 Units Fixed cost per unit = ` 20 per unit ` 15 per unit = ` 5 per unit. 3) Overhead Rate per hour ` 15 per unit Variable cost = = ` 3 per hour ` 5 hrs. per unit ` 5 per unit Fixed cost = = ` 1 per hour ` 5 hrs. per unit Computation of Variable Overheads Variances Output Absorbed VO Input Absorbed VO Actual VO VO 1 VO 2 VO 3 ` 2,33,400 ` 2,22,000 ` 2,32,500 = ` 15 per unit Page No: 1.2

VO 3 = ` 2,95,000 ` 62,500 = ` 2,32,500 VO 2 = Actual Hours Budgeted VO/hr. = 74,000 hrs. ` 3/hr. = ` 2,22,000 VO 1 SHAO Budgeted VO/hr. = (15,560 Units 5 hrs. p.u.) (` 3/hr.) = ` 2,33,400 VO Cost Variance = VO 1 VO 3 = 2,33,400 2,32,500 = ` 900 (F) VO Expenditure Variance = VO 2 VO 3 = 2,22,000 2,32,500 = ` 10,500 (A) VO Efficiency Variance = VO 1 VO 2 = 2,33,400 2,22,000 = ` 11,400 (F) Computation of Fixed Overheads Variances Output Absorbed FO Input Absorbed FO Budgeted FO Actual FO FO 1 FO 2 FO 3 FO 4 ` 77,800 ` 74,000 ` 75,000 ` 62,500 FO 3 = Budgeted Output Budgeted FO/unit = 15,000 unit ` 5 p.u. = ` 75,000 FO 2 = Actual Hours Budgeted FO/hr. = 74,000 hrs. ` 1/hr. = ` 74,000 FO 1 = SHAO Budgeted FO/hr. = (15,560 Units 5 hrs. p.u.) (` 1/hr.) = ` 77,800 FO Cost Variance = FO 1 FO 4 = 77,800 62,500 = ` 15,300 (F) FO Expenditure Variance = FO 3 FO 4 = 75,000 62,500 = ` 12,500 (F) FO Volume Variance = FO 1 FO 3 = 77,800 75,000 = ` 2,800 (F) FO Efficiency Variance = FO 1 FO 2 = 77,800 74,000 = ` 3,800 (F) FO Capacity Variance = FO 2 FO 3 = 74,000 75,000 = ` 1,000 (A) Answer to Q 5 (Nov, 2009) Material Cost Variances:- SP SQAO SP AQ AP AQ M 1 M 2 M 3 ` 4 21,600 kgs. ` 4 22,800 kgs. ` 4.4 22,800 kgs. = ` 86,400 = ` 91,200 = ` 1,00,320 SQAO = 2,160 Units 10 kgs. p.u. = 21,600 kgs. DMCV = M 1 M 3 = 86,400 1,00,320 = ` 13,920 (A) DMUV = M 1 M 2 = 86,400 91,200 = ` 4,800 (A) DMPV = M 2 M 3 = 91,200 1,00,320 = ` 9,120 (A) ` 1,05,600 Actual Price of Raw Material = =` 4.4/kg. 24,000 kgs. Labour Cost Variances SR SHAO SR AH AR AH L 1 L 2 L 3 ` 4 5,400 hrs. ` 4 5,940 hrs. ` 5 5,940 hrs. = ` 21,600 = ` 23,760 = ` 29,700 ` 29,700 Actual Wage Rate = =` 5/hr. 5,940 hrs. SHAO = 2,160 Units 2.5 hrs. per unit = 5,400 hrs. DLCV = L 1 L 3 = 21,600 29,700 = ` 8,100 (A) DLEV = L 1 L 2 = 21,600 23,760 = ` 2,160 (A) DLRV = L 2 L 3 =23,760 29,700 = ` 5,940 (A) Page No: 1.3

Answer to Q 6 (Nov, 2007 ) 1) Material Cost Variances:- SP SQAO SP AQ AP AQ M 1 M 2 M 3 ` 4.20 2,04,800 kgs. ` 4.20 2,05,600 kgs. ` 4.50 2,05,600 kgs. = ` 8,60,160 = ` 8,63,520 = ` 9,25,200 SQAO = 40,960 units 5 kgs. p.u. = 2,04,800 kgs. DMCV = M 1 M 3 = 8,60,160 9,25,200 = ` 65,040 (A) DMUV = M 1 M 2 = 8,60,160 8,63,520 = ` 3,360 (A) DMPV = M 2 M 3 = 8,63,520 9,25,200 = ` 61,680 (A) Labour Cost Variances SR SHAO SR AH AR AH L 1 L 2 L 3 ` 3 1,22,880 hrs. ` 3 1,21,200 hrs. ` 3,87,840 = ` 3,68,640 = ` 3,63,600 SHAO = 40,960 Units 3 hrs. p.u. = 1,22,880 hrs. DLCV = L 1 L 3 = 3,68,640 3,87,840 = ` 19,200(A) DLEV = L 1 L 2 = 3,68,640 3,63,600 = ` 5,040 (F) DLRV = L 2 L 3 = 3,63,600 3,87,840 = ` 24,240 (A) Total FO Variance = Output Absorbed FO Actual FO = 40,960 Units ` 3.60 p.u. ` 1,00,000 = ` 47,456 (F) Answer to Q 7 (Nov, 2011) (1) Material Cost Variance = Standard Material Cost for Actual Output Actual Material Cost = (4,800 units 10 kgs. per unit ` 10/kg) - ` 5,25,000 = ` 4,80,000 - ` 5,25,000 = ` 45,000 (A) (2) Labour Cost Variance = Standard Labour Cost for Actual Output Actual Labour Cost = (4,800 units 6 hrs. per unit ` 5.5/hr) - ` 1,55,000 = ` 1,58,400 - ` 1,55,000 = ` 3,400 (F) (3) Fixed Overhead Cost Variance = Output Absorbed FO - Actual FO = (SHAO)(Budgeted FO/hr) - Actual FO = (28,800 hrs.)(` 15/hr) - ` 4,70,000 = ` 38,000 (A) SHAO = 4,800 units 6 hrs. per unit = 28,000 hrs. Budgeted FO/hr = ` 4,50,000/30,000 hrs. = ` 15/hr. (4) Variable Overhead Cost Variance = Output Absorbed VO - Actual VO = (28,800 hrs.)(` 10/ hr) - ` 2,93,000 = ` 5,000 (A) Answer to Q 8 (May, 2014) (a) Variable Overheads Cost Variance = Output Absorbed VO Actual VO = (Actual Output) Budgeted VO/Unit) Actual VO ` 12,000 = (3,800 Units) = ` 3 p.u. 4,000 units - ` 12,000 = ` 11,400 ` 12,000 = ` 600 (A) (b) Fixed Overheads Expenditure Variance = Budgeted FO Actual FO = ` 40,000 ` 39,000 = ` 1,000 (F) Page No: 1.4

(c) Fixed Overheads Volume Variance = Output Absorbed FO Budgeted FO = ` 38,000 ` 40,000 = ` 2,000 (A) Output Absorbed FO = Actual Output Budgeted FO/Unit ` 40,000 = (3,800 Units) = `10 p.u. 4,000 units = ` 38,000 Answer to Q 9 (Nov, 2010) Total Sales Variances = Actual Sales - Budgeted Sales P = (4,800 units)(` 30 per unit) - (4,000 units)(` 25 per unit) = ` 44,000 (F) Q = (2,800 units)(` 45 per unit) - (3,000 units)(` 50 per unit) = ` 24,000 (A) R = (2,400 units)(` 70 per unit) - (2,000 units)(` 75 per unit) = ` 18,000 (F) S = (800 units)(` 105 per unit) - (1,000 units)(` 100 per unit) = ` 16,000 (A) = ` 22,000 (F) Sales Price Variances = (Actual Selling Price Budgeted Selling Price) (Actual Quantity Sold) P = (` 30 - ` 25)(4,800 units) = ` 24,000 (F) Q = (` 45 - ` 50)(2,800 units) = ` 14,000 (A) R = (` 70 - ` 75)(2,400 units) = ` 12,000 (A) S = (` 105 - ` 100)(800 units) = ` 4,000 (F) = ` 2,000 (F) Sales Volume Variances = (Budgeted Price) (Actual Quantity - Budgeted Quantity) P = (` 25 per unit)(4,800 units - 4,000 units) = ` 20,000 (F) Q = (` 50 per unit)(2,800 units - 3,000 units) = ` 10,000 (A) R = (` 75 per unit)(2,400 units - 2,000 units) = ` 30,000 (F) S = (` 100 per unit)(800 units - 1,000 units) = ` 20,000 (A) = ` 20,000 (F) Answer to Q 10 (Nov, 2013) Material Cost Variances:- SP SQAO SP AQ AP AQ M 1 M 2 M 3 ` 45 9,000 kgs. = ` 4,05,000 ` 45 8,900 kgs. = ` 4,00,500 ` 46 8,900 kgs. = ` 4,09,400 SQAO = Actual Output Budgeted input per unit = 900 packets 10 kgs. per packet = 9,000 kgs. DMCV = M 1 M 3 = ` 4,05,000 `4,09,400 = ` 4,400 (A) DMUV = M 1 M 2 = ` 4,05,000 `4,00,500 = ` 4,500 (F) DMPV = M 2 M 3 = ` 4,00,500 `4,09,400 = ` 8,900 (A) Labour Cost Variances SR SHAO SR AH AR AH L 1 L 2 L 3 ` 50 7,200 hrs. ` 50 7,000 hrs. ` 52 7,000 hrs. = ` 3,60,000 = ` 3,50,000 = ` 3,64,000 SHAO = Actual Output Budgeted input per unit = 900 packets 8 hrs. per unit = 7,200 hrs. DLCV = L 1 L 3 = ` 3,60,000 ` 3,64,000 = ` 4,000(A) DLEV = L 1 L 2 = ` 3,60,000 ` 3,50,000 = ` 10,000 (F) DLRV = L 2 L 3 = ` 3,50,000 ` 3,64,000 = ` 14,000 (A) Variable Overhead Cost Variance = Output Absorbed VO Actual VO = (900 packets)(` 80/packet) - ` 72,500 = ` 500 (A) Fixed Overhead Cost Variance = Output Absorbed FO Actual FO = (900 packets)(` 200/packet) - ` 1,92,000 = ` 12,000 (A) Page No: 1.5

Answer to Q.11 (May, 2012) Annual Production Budget Annual budget sales (18,000 + 22,000 + 25,000 + 27,000) 92,000 units (+) Closing Stock of Finished Goods 8,000 units (-) Opening Stock of Finished Goods (-) 6,000 units Annual budgeted production 94,000 units Quarter Wise Production Budget Budgeted Production Quarter 70% of Sales of Current Quarter 30% of Sales of Next Quarter Total I 70% of 18,000 units 30% of 22,000 units = 12,600 units = 6,600 units 19,200 units II 70% of 22,000 units 30% of 25,000 units = 15,400 units = 7,500 units 22,900 units III 70% of 25,000 units 30 % of 27,000 units = 17,500 units 8,100 units 25,600 units IV 70% of 27,000 units 7,400 units 26,300 units = 18,900 units (Balancing Figure) (Balancing Figure) Annual Budgeted Production 94,000 units Answer to Q.12 (RTP) Production Budget (in Units) Particulars Product A Product B Budgeted Sales (4 5 = 20 working days) 2,400 3,600 (+) Closing Stock of finished goods 4 2,400 20 = 480 3,600 5 20 = 900 (-) Opening Stock of finished goods 400 200 Budgeted Production 2,480 4,300 Raw Material Purchase Budget Particulars Material X Material Y Budgeted Consumption Product A 2,480 5 = 12,400 kgs. 2,480 4 = 9,920 kgs. Product B 4,300 3 = 12,900 kgs. 4,300 6 = 25,800 kgs 25,300 kgs. 35,720 kgs. (+) Closing Stock of Raw Material 25,300 10 6 = 12,650 kgs. 35,720 = 10,716 kgs. 20 20 (-) Opening Stock of Raw Material (-) 1,000 kgs. (-) 500 kgs. Budgeted Purchase 36,950 kgs. 45,936 kgs. Rate per kg. ` 4 ` 6 Total Purchase cost ` 1,47,800 ` 2,75,616 Labour Cost Budget Total hours Rate/hr. Total Wages Normal Time 28,800 ` 25 ` 7,20,000 Over Time 14,610 ` 37.50 ` 5,47,875 43,410 ` 12,67,875 Normal Time = 180 workers 4 weeks 40 hrs. /week = 28,800 hrs. Efficiency Ratio = 80% Page No: 1.6

Standard hrs. for Output Obtained Actual Hours Worked 100 = 80 Actual hours worked = Standard hrs. for Output Obtained 100 80 A 2,480 Units @ 3 hrs. p.u. = B 4,300 Units @ 5 hrs. p.u. 100 = 36,175 hrs. 80 Actual Hrs. Paid = Actual hrs. Worked + Idle Time = 36,175 hrs. + 20% of 36,175 hrs. = 43,410 hrs Answer to Q.13 (May, 2013) Flexible Budget Particulars 20,000 units 15,000 units 18,000 units Variable Expenses Direct Materials (` 50 p.u.) 10,00,000 7,50,000 9,00,000 Direct Labour (` 20, p.u.) 4,00,000 3,00,000 3,60,000 Variable Overhead (` 15 p.u.) 3,00,000 2,25,000 2,70,000 Direct Expenses (` 6 p.u.) 1,20,000 90,000 1,08,000 Variable Selling Expenses (80% of ` 15 = ` 12 p.u.) 2,40,000 1,80,000 2,16,000 Variable Distribution Expenses (85% of ` 12 = ` 10.20 p.u.) 2,04,000 1,53,000 1,83,600 Total Variable Expenses 22,64,000 16,98,000 20,37,600 Fixed Expenses Fixed Selling Expenses 60,000 60,000 60,000 Fixed Factory Expenses 1,40,000 1,40,000 1,40,000 Fixed Admin. Expenses 80,000 80,000 80,000 Fixed Distribution Expenses 36,000 36,000 36,000 Total Fixed Expenses 3,16,000 3,16,000 3,16,000 Total Cost 25,80,000 20,14,000 23,53,600 Answer to Q.14 (May, 2002) Flexible Budget Particulars Present Situation Proposed Situation Proposal 1 Proposal 2 Sales Quantity 2,50,000 units 4,00,000 units 5,00,000 units Variable Expenses Direct Materials (` 5 p.u.) 12,50,000 20,00,000 24,75,000 (5,00,000 4.95) Direct Labour 2,50,000 2 = 5,00,000 4,00,000 2 = 8,00,000 5,00,000 2 = 10,00,000 Variable Production OH 2,50,000 3 = 7,50,000 4,00,000 3 = 12,00,000 5,00,000 3 = 15,00,000 Variable Selling OH 2,50,000 1 = 2,50,000 4,00,000 1 = 4,00,000 5,00,000 1.05 = 5,25,000 Total Variable Expenses 27,50,000 44,00,000 55,00,000 Fixed Expenses Fixed Production Overheads 9,00,000 13,00,000 15,00,000 Fixed Selling Overheads 6,00,000 8,00,000 6,00,000 Total Fixed Expenses 15,00,000 21,00,000 21,00,000 Total Cost 42,50,000 65,00,000 76,00,000 Profit (Balance) 2,50,000 7,00,000 4,00,000 Sales 45,00,000 (2,50,000 18) 72,00,000 (4,00,000 18) 80,00,000 (5,00,000 16) Page No: 1.7

Answer to Q 15 (May, 2009) Production Budget (in units) Particulars January February March April Budgeted Sales 10,000 12,000 14,000 15,000 (+) Closing Stock of Finished Goods 2,400 2,800 3,000 3,000 (20% of next month sales) (-) Opening Stock of Finished Goods (2,700) (2,400) (2,800) (3,000) Budgeted Production 9,700 12,400 14,200 15,000 Raw Material Consumption Budget Particulars January February March April Budgeted Production (Units) 9,700 12,400 14,200 15,000 Budgeted Consumption Material X [4 kgs. per unit] 38,800 kgs. 49,600 kgs. 56,800 kgs. 60,000 kgs. Material Y [6 kgs. per unit] 58,200 kgs. 74,400 kgs. 85,200 kgs. 90,000 kgs. Raw Material Purchase Budget January February March Raw Material X Budgeted Consumption 38,800 kgs. 49,600 kgs. 56,800 kgs. (+) Closing Stock of Raw Material 24,800 kgs. 28,400 kgs. 30,000 kgs. (50% of next month consumption) (-) Opening stock of Raw Material 19,000 kgs. 24,800 kgs. 24,800 kgs. Budgeted Purchase 44,600 kgs. 53,200 kgs. 58,400 kgs. Raw Material Y Budgeted Consumption 58,200 kgs. 74,400 kgs. 85,200 kgs. (+) Closing Stock of Raw Material 37,200 kgs. 42,600 kgs. 45,000 kgs. (50% of next month consumption) (-) Opening stock of Raw Material 29,000 kgs. 37,200 kgs. 42,600 kgs. Budgeted Purchases 66,400 kgs. 79,800 kgs. 87,600 kgs. Material Cost Variances DMCV = (SP)(SQAO) (AP)(AQ) X = (` 10) (1,60,000 kgs.) (` 10.20)(1,65,000 kgs.)= ` 83,000 (A) Y = (` 15) (2,40,000 kgs.) (` 15.10)(2,38,000 kgs.)= ` 6,200 (F) ` 76,800 (A) DMPV = (SP AP) (AQ) X = (` 10 ` 10.20) (1,65,000 kgs.) = ` 33,000 (A) Y = (` 15 ` 15.10) (2,38,000 kgs.) = ` 23,800 (A) ` 56,800 (A) DMUP (SP) (SQAO - AQ) X = (` 10) (1,60,000 kgs. 1,65,000 kgs.) = ` 50,000 (A) Y = (` 15) (2,40,000 kgs. 2,38,000 kgs.) = ` 30,000 (F) ` 20,000 (A) SQAO = Actual Output Budgeted Input per unit X = 40,000 units 4 kgs. p.u. = 1,60,000 kgs. Y = 40,000 units 6 kgs. p.u. = 2,40,000 kgs. Page No: 1.8

Labour Cost Variances Basic Calculations (a) Budgeted Labour Cost for Quarter (January to March)= ` 10,89,000 (b) Budgeted Production (January to March) = 9,700 + 12,400 + 14,200 = 36,300 units (c) Budgeted Labour Hours = 36,300 units 3 4 hr. per unit = 27,225 hours ` 10,89,000 (d) Budgeted Wage Rate per hour = = ` 40 /hr. 27,225 hrs. ` 13,12,000 (e) Actual Rate Per hour = = ` 41/hr 32,000 hrs. DLCV = (SR)(SHAO) (AR)(AH) = (` 40) (30,000 hrs.) (` 41) (32,000 hrs.) = ` 12,00,000 ` 13,12,000 = ` 1,12,000 (A) DLRV = (SR AR)(AH) = (` 40 ` 41) (` 32,000 hrs.) = ` 32,000 (A) DLEV = (SR)(SHAO AH) = (` 40) (30,000 hrs. 32,000 hrs.) = ` 80,000 (A) SHAO = 40,000 units 3 4 hr. per unit = 30,000 hrs. Answer to Q 16 (Nov, 2007) Efficiency Ratio = Standard hrs. for Output Obtained x 100 Actual hours Worked Capacity Ratio = Actual Hours Worked x 100 Budgeted Hours 60 Units x 8 hrs. p.u. = x 100 = 96% 500 hrs. 500 hrs. = x 100 = 78.125% 80 Units x 8 hrs. p.u. Page No: 1.9