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standard costing

here the calendar variance is negative... then how is it favourable?

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Kumar Sarthak

Kumar Sarthak

CA Inter

9K+

15-Mar-21 16:52

24

Answers (4)

Best Answer

Mam if actual working days are greater than budgeted working days then it should be unfavorable because cost is increasing ?

Whatever be the actual working days, the fixed overhead remains Rs.4,00,000. So there will be no increase in fixed overhead even when the number of actual working days increase and there will be an increase in production, which is favourable. So if the actual days worked is more than the budgeted days, we find it favourable in terms of increased output and vice-versa. Do not consider the labour cost here. It will be considered in computation of labour variance.


Madhuri Veluri

Madhuri Veluri

Moderator

16-Mar-21 11:02

The formula is wrong in the solution. It should be Standard Fixed overhead per day x [Actual working days - Budgeted working days]. But they considered Budgeted working days - Actual working days. With the actual formula, the answer will be 20,000(F).


Madhuri Veluri

Madhuri Veluri

Moderator

16-Mar-21 10:28

The formula is wrong in the solution. It should be Standard Fixed overhead per day x [Actual working days - Budgeted working days]. But they considered Budgeted working days - Actual working days. With the actual formula, the answer will be 20,000(F).

Mam if actual working days are greater than budgeted working days then it should be unfavorable because cost is increasing ?


Kumar Sarthak

Kumar Sarthak

CA Inter

9K+

16-Mar-21 10:33

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