need project note

Solution: Pachuca's - Students' Handbook on Strategy toda solution, FIFO Method has been adopted for Variance Computation Either FIFO O WAC Method can be used for computing Equivalent Pro 1. Statement of Equivalent Production - Product A - FIFO Method Input Particulars Particulars Output Transfer from Opening WIP 4,000 Opening WIP Fresh Input (b/ 20,000 Fresh Units (bal.fig) 12,000 Total Transfer Cosing WIP Total 24,000 Total Nil 100% 4,000 Labour and OH % EU 50% 2,000 100% 12,000 14,000 80% 6,400 20,400 Materials % E.U Nil 12,000 12,000 8,000 20,000 16,000 8,000 24,000 100% Particulars Opening WIP Fresh Input (b/t) 2. Statement of Equivalent Production - Product B - FIFO Method Input Particulars Output Materials Transfer from - % E.U 12,000 Opening WIP 12,000 Nil Nil 20,000 Fresh Units (bal.fig) 8,000 100% 8,000 Total Transfer 20,000 8,000 Closing WIP 12,000 100% 12,000 32,000 Total 32,000 20,000 Labour and OH % E.U 50% 6,000 100% 8,000 14,000 9,600 23,600 80% Total Note: If WAC Method is applied, the Equivalent Production for Product A and B will be as under - Particulars Labour and OH % E.U 100% 16,000 80% 6,400 22,400 Opening WIP Fresh Input (b/f) Total 1. Statement of Equivalent Production - Product A - WAC Method Input Particulars Output Materials % E.U 4,000 Transfer to Warehouse 16,000 100% 16,000 20,000 Closing WIP 8,000 100% 8,000 24,000 Total 24,000 24,000 2. Statement of Equivalent Production - Product B-WAC Method Input Particulars Output Materials % E.U 12,000 Transfer to Warehouse 20,000 100% 20,000 20,000 Closing WIP 12,000 100% 12,000 32,000 Tota! 32,000 32,000 Particulars Labour and OH % EU 100% 20,000 80% 9,600 29,600 Opening WIP Fresh Input (b/f) Total Note: 3. Computation of Material Cost Variances Since the relationship between Standard Prices and Actual Prices is 2,00,000 and 2,20,000 (for the quantity purchased), the actual costs of the material consumed is computed using this relationship. (2): AQ SP (1): Std Cost = SQ SP (3): Actual Cost = AQ X AP 220 1,75,000 x = 1,92,500 (See Note) 200 (Given) 1,75,000 (20,000 X 2) + (20,000 x 4) = 1,20,000 + Material Usage Variance = 1,20,000 - 1,75,000 = 55,000 A Material Price Variance = 1,75,000 - 1,92,500 = 17,500 A Total Material Cost Variance = {1,20,000 - 1,92,500 = 3 72,500 A Note: Material Purchase Price Variance = PQ x SP - PQ x AP = 2,00,000 - 2,20,000 = 320,000 A. This is called Direct Materials Price Variance at the point of purchase. Direct Materials Price Variance at the point of consumption = Material Price Variance (as per Chart) = * 17,500 16.36 (2): BFON (given) 4. Computation of Labour Cast Variances (1): SHSR (2) AMX SR (3): AN XAR 240078) (23.500 20.000 412,000 22.04.200 (given) Standard Costing and variance Analysis S. Computation of FOR Cost Variances (1):AOXSR (3):AFOH (20.100 x 16) + (23,600 8,25,000 8,50,000 * 12) = 76,09,600 (given) Volume Variance + Expenditure Variance 76,09,600 8,25,000 -78,25,000 - 8,50,000 -2,15,400 A - 25,000 A Cover Eiciency Variance 3.04.2004.20,000 = 1.15.200 A Rate Variance 24,20,000 4,12,000 -8.000 F Total Labour Cost Variance Total FOH Cost Variance +3.04.800 4,12,000 = R1,07,200 A - 6,09,600 8,50,000 * 2,10,400 A Note: In the absence of adequate information, FOH Efficiency and Capacity Variances are not computed. 6. Valuation of WIP at Standard Costs: Particulars Product A Product B Materials 8,000 units x 2 = 16,000 12,000 units x 4 = 48,000 Labour 6,400 units x 8 = 51,200 57,600 9,600 units x 763 Fixed Overheads 6,400 units x 16 = 1,02,400 Total Standard Cost of WIP 9,600 units x 12 = 1,15,200 Note: IF WAC Method is applied, the Variances will be as under - Material Usage 17,500 A, Materials Usage 1,000 F,