Practical Problems

Q. A manufacturing concern which has adopted standard costing, furnishes the following information: (Dec. 02)

Standard

Materials for 70 units of finished product = 100 kg
Price of meterial per kg = Re. 1

Actual

Output = 2,10,000 units
Materials used = 2,80,000 kg
Cost of materials = Rs. 2,52,000

Calculate material usage variance, material price variance, and material cost variance. Also state the possible causes of Material Usage Variance

i) Material Usage Variance = Standard material used - Actual material used
= 3,00,000 - 2,80,000 = 20000 Kg. (favourable)

ii) Material Price Variance = Standard quantity of material X (Standard price - Actual price)
= 3,00,000 (1 - .90)
= Rs. 30,000 (favourable)

iii) Material Cost Variance = Standard cost of material - Actual cost of material
= 3,00,000 - 2,52,000
= 48,000 (favourable)

> For possible causes of material usage variance, please refer to the theory part.