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Question on Standard Costing – I don’t understand the math behind 100\80 * 1 (pls explain to me)
A company manufactures a carbonated drink, which is sold in lL bottles. During the bottling process there is a 20% loss of liquid due to spillage & evaporation. What is the standard usage per bottle?
For every 100 litres produced, 20 will be wasted and 80 will go into the bottle.
Or to put it the other way round, for every 80 in the bottle they will need to make 100.
So the quantity produced will have to be 100/80 times the amount in the bottle.
Hi,
I do not understand whether “the total variable production overhead cost variance and the expenditure variable production overhead cost are same or different”.I have found that the formula for the former is “(Actual overhead production expenditure – Actual production X standard variable overhead production rate per unit) X standard labour rate”, and, for the later is “Actual hour X Standard rate- Actual hour x Actual rate”.
Please clarify my confusion.
thank u.
Please start a new thread when you are asking about a different topic – this is not directly related to standard costing, but is related to variance analysis 🙂
Firstly, a cost variance is certainly not the same as a cost – it is the difference between the standard cost for the actual production and the actual cost.
You should not learn formulae – the examiner deliberately asks questions that check you understand what you are doing rather then simply learning formulae.
If you watch my free lectures on variances then they will clear your confusion 🙂
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