Answer to Question #287324 in Finance for Zamis

Question

A mfg. concern, which has adopted standard costing, furnishes the following information:

Standard:

Material for 70 kg. Of finished products ----> 100 kgs.

Price of materials . -----> Rs. 1 per kg

Actual:

Output ----> 210,000 kgs

Material used -----> 280,000 kgs.

Cost of materials  ----> Rs. 2,52,000

Calculate material cost variance, material price variance, and material usage variance?

Answer 1

Material cost Variance= $(Standard Quantity\times Standard Price)- (Actual Quantity\times Actual Price)$

= $(Standard Quantity\times Standard Price)- (Actual Quantity\times Actual Price)$

Standard quantity=$\frac {(2100000\times100)} {70}=3,000,000$

Actual price= $\frac {252000} {280000}=0.9$

MCV=$(3000000\times 1)- (280000\times 0.9)$

$(3000000)- (252000)= 2,748,000 (F)$

Material Price Variance=$(Budgeted Price-Actual Price)\times Quantity of material Used$

= $(1-0.9)\times 280,0000$

= 28,000 (F)

Material Usage Variance

$MUV=(Standard Quantity allowed-Actual quantity used)\times standard price per unit of material$

$=(3000000-280,000)\times 1$

$= 2,720,000$