Case study

FG Utensils is in the manufacturing of household utensils for the last 10 years. At the year end, Mr. Kumar, the Finance Manager called the production manager Mr. Sohan and asked him about the details of the production and the expenses incurred for the year. Mr. Sohan the following details with the finance manager: The company follows standard costing system. During the year 5,000 units were produced and the direct material consumed was 20,500 kg. The price of raw material is Rs.2.60 per kg. The direct labour cost and variable overhead incurred were Rs. 57,750 and Rs.32,400 respectively. The variable overhead efficiency is Rs. 3,000 (unfavorable). Variable overheads are based on direct labor hours. There was no stock of raw material at the beginning of the month. The standard cost data per unit of output is Direct material 4 Kg@ Rs.2.50/ kg, Direct labor 2 hours @Rs.6/hour and Variable overhead 2 hours @Rs.3/hr.

Question 1: - The variable overhead efficiency variance would be ? a) Rs. 3,000 Favorable b) Rs. 3,500 adverse c) Rs. 3,000 Adverse d) Rs. 3,200 Adverse

Question 2:- The aggregate of total material, labor and variable overhead variance ? a) Rs.3,500 Adverse b) Rs.3,450Favourable c) Rs.3,550Favourable d) Rs.3,450 Adverse

Question 3:- The material price variance is in excess of usage variance by . a) Rs.800 Adverse b) Rs.850 Favourable c) Rs.800 Favourable d) Rs.1,050 Adverse

Question 4:- The variable overhead budget variance would be a) Rs.700 Adverse b) Rs.600 Adverse c) Rs.900 Adverse d) Rs.650 Adverse

Question 5:- The aggregate of material cost and labor cost variance is ? a) Rs.1100 Favourable b) Rs.1150 Favourable c) Rs.1050 Adverse d) Rs.1000 Adverse