Question 3
Material cost, price, usage, mix and yield variances
18 marks
- Time to write
- About 36 minutes
Question
Question 3 · 18 marksRohit Limited., a manufacturing concern that has adopted standard costing, gives the following information for the month ended March 31, 2024:
To produce 10 units of product Z, the standard mix is:
Material A 300 kg. @ Rs.32 per kg
Material B 400 kg. @ Rs.48 per kg
Material C 500 kg. @ Rs.42 per kg
In March, 2024, the units of product Z actually produced were 100, and consumption was:
Material A 3,150 kg. @ Rs.36 per kg
Material B 4,800 kg. @ Rs.52 per kg
Material C 4,290 kg. @ Rs.40 per kg
Required: Calculate these material variances:
Cost Variance of Material
Price Variance of Material
Usage Variance of Material
Mix Variance of Material
Yield Variance of Material
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- (i)–(v)5 items, each marked on its own: give each its share.
- CalculateFormula first, then the working, then the answer with its unit (₹, %, units).
What the paper leaves open
No marks are printed against Q3; it is reckoned at 18 (its alternative carries 6 + 12).
Write it in this order
- Read the data; note exactly what is asked 2 min
- 1 Working table SQ, AQ, RSQ, standard and actual cost 4 marks 7 min
- 2 Cost and price variances 4 marks 7 min
- 3 Usage variance 3 marks 5 min
- 4 Mix and yield variances 5 marks 9 min
- 5 Reconciliation 2 marks 4 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
Try it first. About 36 minutes for 18 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Standard quantity (SQ) for the actual output of 100 units = 10 times the standard mix for 10 units. The revised standard quantity (RSQ) is the actual total quantity of 12,240 kg divided in the standard ratio 300: 400: 500 (that is, 3: 4: 5).
| Material | SQ for actual output (kg) | Standard price (₹) | Standard cost of actual output (₹) | Actual quantity (kg) | Actual price (₹) | Actual cost (₹) | RSQ (kg) |
|---|---|---|---|---|---|---|---|
| A | 3,000 | 32 | 96,000 | 3,150 | 36 | 1,13,400 | 3,060 |
| B | 4,000 | 48 | 1,92,000 | 4,800 | 52 | 2,49,600 | 4,080 |
| C | 5,000 | 42 | 2,10,000 | 4,290 | 40 | 1,71,600 | 5,100 |
| Total | 12,000 | 4,98,000 | 12,240 | 5,34,600 | 12,240 |
Variances (F = favourable, A = adverse)
- Material Cost Variance (MCV) = Standard cost of actual output − Actual cost = ₹4,98,000 − ₹5,34,600 = ₹36,600 (A).
- Material Price Variance (MPV) = AQ × (SP − AP)
- A: 3,150 × (32 − 36) = ₹12,600 (A)
- B: 4,800 × (48 − 52) = ₹19,200 (A)
- C: 4,290 × (42 − 40) = ₹8,580 (F)
- Total ₹23,220 (A)
- Material Usage Variance (MUV) = SP × (SQ − AQ)
- A: 32 × (3,000 − 3,150) = ₹4,800 (A)
- B: 48 × (4,000 − 4,800) = ₹38,400 (A)
- C: 42 × (5,000 − 4,290) = ₹29,820 (F)
- Total ₹13,380 (A)
- Material Mix Variance (MMV) = SP × (RSQ − AQ)
- A: 32 × (3,060 − 3,150) = ₹2,880 (A)
- B: 48 × (4,080 − 4,800) = ₹34,560 (A)
- C: 42 × (5,100 − 4,290) = ₹34,020 (F)
- Total ₹3,420 (A)
- Material Yield Variance (MYV) = SP × (SQ − RSQ)
- A: 32 × (3,000 − 3,060) = ₹1,920 (A)
- B: 48 × (4,000 − 4,080) = ₹3,840 (A)
- C: 42 × (5,000 − 5,100) = ₹4,200 (A)
- Total ₹9,960 (A)
Yield variance by the alternative method: standard cost per kg of the standard mix = ₹49,800 ÷ 1,200 kg = ₹41.50; (12,000 − 12,240) kg × ₹41.50 = ₹9,960 (A).
- MPV ₹23,220 (A) + MUV ₹13,380 (A) = MCV ₹36,600 (A).
- MMV ₹3,420 (A) + MYV ₹9,960 (A) = MUV ₹13,380 (A).
Where the 18 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Working table (SQ, AQ, RSQ, standard and actual cost) | 4 |
| 2 | Cost and price variances | 4 |
| 3 | Usage variance | 3 |
| 4 | Mix and yield variances | 5 |
| 5 | Reconciliation | 2 |
| Total | 18 |
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