Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed


Price and efficiency variances, problems in standard setting, benchmarking



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15.23 Price and efficiency variances, problems in standard setting, benchmarking.
(30–40 min)
1
Budgeted materials input per shirt = 0.10 roll of cloth Budgeted manufacturing labour-hours per shirt = 0.25 hours Budgeted materials cost = €50 per roll Budgeted manufacturing labour cost per hour = €18 per hour Actual output achieved = 4,488 shirts.


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012

Flexible budget

Actual costs

(Budgeted input

incurred

allowed for actual

(Actual input
Actual input
Output achieved

× Actual price)
× Budgeted price
× Budgeted price)
Direct

(408 × €450)
(4,488 × 0.10 × €50) materials €20,196 €20,400
€22,440

€204 FF Price variance
Efficiency variance Direct manufacturing
(1,020
×
€18)
(4,488 × 0.25 × €18) labour €18,462 €18,360
€20,196

€102 U
€1,836 F Price variance
Efficiency variance

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