Answered: The XYZ Company uses Standard costing…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter10: Standard Costing And Variance Analysis

Section: Chapter Questions

Problem 72P: Moleno Company produces a single product and uses a standard cost system. The normal production...

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The XYZ Company uses Standard costing system. Following data are taken from its cost record.
STANDARD ACTUAL
Direct Material Rate per unit Rs. 10 Rate per unit Rs. 12
Total Cost Rs. 80,000 Quantity 8,600 units
Direct Labour Wages per hour Rs. 40 Wages per hour Rs. 30
Total labour hours 600 Total labour cost Rs. 16,500
Factory Overhead 90% of Direct labour Rs. 20,000
Required:
1] Compute the Following. a) Material Price Variance
b) Material Quantity Variance c) Labour Rate Variance
d) Labour efficiency variance e) Overhead Variance

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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