Standard Costing – Easy understanding

Standard costing made easy
Standard costing is such a simple lesson. But students of CA, CMA and CS are really struggling to study this lesson. Please don’t approach the problem with formulae available in your book. First understand the concepts.
Example
Raman and Somu are going to film Kabali. Their budget is Rs. 200 (Rs 100 each). On the way they meet their girlfriend Roja and Rani. They also join with Raman and Somu. When they reach theatre, they notice that ticket fare is Rs 120. They buy the ticket and see the film.
Find price variance and Qty variance in this case?

Budgeted Qty – 2
Budgeted Ticket fare – Rs. 100 / Head
Actual ticket fare – Rs 120 / Ticket
Actual Qty – 4

Budgeted amount is Rs 200 = 2 * 100
Actual amount incurred is Rs. 480 = 4 * 120
Total Variance is Rs. 280 ( 480 – 200) Adverse

Price Variance = Actual Qty (Actual price – Budgeted price)
= 4(120-100)
=4 * 20
= 80 (Adverse)
Qty variance =Budgeted price (Actual Qty – Budgeted Qty)
=100 (4-2)
=100 * 2
= 200 ( Adverse)
Total Variance = Price Variance + Qty Variance
= 80 + 200
=280 Adverse

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