BelAir Company

Variance Analysis and Operating Statement*

Dr NL Ahuja
A. Budgeted cost and selling price per unit

Raw material = 120

Labour = 200
Variable overhead = 40
Fixed Overhead = 20
380
Profit 100
Price 480

Total Budgeted Profit = 1000 units @ 100 =Rs. 100000

Actual Total:

Sales = 432000
Material Cost = 111000
Labour Cost = 161500
Variable overhead = 38500
Fixed overhead = 20000
Total cost 331000
Actual Profit = 432000 331000 = 101000

B. VARIANCES

(1) Material Price Variance = (40-37) 3000 = 9000 favorable

(2) Material Quantity = (9003-3000) 40 = 12000 adverse
(3) Total Material Variance = (900120) 3000x37 = 3000 adverse

(4) Labour rate = (100-95) 1700 = 8500 favourable

(5) labour Efficiency = (9002-1700) 100 = 10000 favourable
(6) Total Labour Variance =900200-161500 = 18500 favourable

(7) Variable Overhead Efficiency = (9002-1700) 20 = 2000 favourable

(8) Variable O H Expenditure = 170020-38500 = -4500 favourable
(9) Variable total OH variance = Absorbed Actual
= 900x2x20 38500 = -2500

(10) Fixed Overhead capacity = (1700 2000) 10 = 3000 adverse

(11) Fixed Overhead Efficiency = (1800-1700) 10 = 1000 favourable
(12) Fixed O H Expenditure = 10000-10000 = Nil
(13) Total fixed OH variance = 900x2x10 20000 = -2000
 (14) Sales Volume (Profit) Variance = (900-1000) 100 = 10000 adverse

C. OPERATING STATEMENT

Budgeted Profit 100000

Less: Sales Volume Variance (10000)
90000

Variance Favourable Adverse

Material Price 9000

Material Quantity 12000
Labour Rate 8500
Labour Efficiency 10000
Variable OH Efficiency 2000
Variable OH Expenditure 4500
Fixed OH Capacity 3000
Fixed OH Efficiency 1000 ____
30500 19500 11000

Actual Profit 101000

* August 2016 version. All rights reserved.