Q.4

1. Standard cost systems provide companies with a number of advantages, argue the statement.

(02 marks)

2. Following are the details of Abbass Industries for the period ended June 30, 2020. Company establish standard on its normal capacity of 120,000 units/hours in a year:

Direct Material 600,000 kgs at Rs. 9 per kg

Direct Labor 4 hours per unit at Rs. 6 per hour

Factory overhead:

Fixed cost Rs. 240,000 per year or Rs. 20,000 per month.

Variable Cost Rs. 4.50 per hour.

During the one month of operation, company produced 11,000 units.

Direct material used: 60,500 kgs at Rs. 9.10 per kg

Direct labor used: 41,250 hours at Rs. 268,125

Calculate the two variances for material, two variances for labor, and two variances for factory overhead. (08 marks)