Material Variances knowing standard quantity, and price and actual quantity, and cost for different outputs using a single material

S1P4

Problem 5

The standard material required to manufacture one unit of product A is 10 kg and the standard price per kg is 3.00. In the month of March, 300 units of product A were produced by using 3,300 kg of material at a cost of 10,230.

Calculate variances.

Ans:
1
MYV/MSUV
MMV
− 900
0
MQV/MUV
MPV
− 900
− 330
MCV − 1,230

Working Notes

The following data could be picked up from the problem

Standard Actual
SQ SP AQ AP AC
Material 1 10 3 3,300 3.1 10,230
Output 1 300

units : _Q in kgs, _P in value/kgs and _O in units

The underlined figures are obtained through the below calculations

AP =
AC
AQ
=
10,230
3,300
= 3.1

Working Table

Working table incorporating the data in the problem and the calculated values including recalculated standards
Working Table with recalculated standards
Standard Actual
for SO for AO for AI
SQ SP SQ(AO) SC(AO) SQ(AI) SC(AI) AQ AP AC SC(AQ)
Factor 300 330
Material 1 10 3 3,000 9,000 3,300 9,900 3,300 3.1 10,230 9,900
Total 10 3,000 9,000 3,300 9,900 3,300 10,230 9,900
Output 1
SO
300
SO(AO)
330
SO(AI)
300
AO

Output (_O) is in units, Quantities (_Q) and Losses (_L) are in kgs, Prices (_P) are in monetary value per kg and Costs (_C) are in monetary values.

Standard Output

SO = 1 unit (given)

Actual Output

AO = 300 unit (given)
(AO) =
AO
SO
=
300
1
= 300
(AI) =
AI
SI
=
AQMix
SQMix
=
3,300
10
= 330
1. SQ(AO) = SQ ×
AO
SO
= SQ × 300

2. SC(AO) = SQ(AO) × SP

3. SO(AO) = AO

4. SQ(AI) = SQ ×
AI
SI
= SQ × 330

5. SC(AI) = SQ(AI) × SP

6. SO(AI) = SO ×
AI
SI

7. SC(AQ) = AQ × SP

Solution

Material Cost Variance

MCV = SC(AO) − AC

= 9,000 − 10,230 = − 1,230 [Adv]

Material Price Variance

MPV = SC(AQ) − AC

= 9,900 − 10,230 = − 330 [Adv]

Material Quantity/Usage Variance

MQV/MUV = SC(AO) − SC(AQ)

= 9,000 − 9,900 = − 900 [Adv]

Material Mix Variance

MMV = SC(AI) − SC(AQ)

= 9,900 − 9,900 = 0

Material Yield/Sub-Usage Variance

MYV/MSUV = SC(AO) − SC(AI)

= 9,000 − 9,900 = − 900 [Adv]

Solution (alternative presentation)

Material 1
MYV/MSUV

SC(AO)
9,000


SC(AI)
9,900
+ MMV

SC(AI)
9,900


SC(AQ)
9,900


− 900


0
MQV/MUV

SC(AO)
9,000


SC(AQ)
9,900
+ MPV

SC(AQ)
9,900


AC
10,230


− 900


− 330
MCV

SC(AO)
9,000


AC
10,230


− 1,230

Verification

If adopting the first and second presentation methods, it would help building the following table to enable us to verify whether our workings are correct or not.

Verification

Formula Material 1
MYV/MSUV
+ MMV
SC(AO) − SC(AI)
SC(AI) − SC(AQ)
− 900
0
MQV/MUV
+ MPV
SC(AO) − SC(AQ)
SC(AQ) − AC
− 900
− 330
MCV SC(AO) − AC − 1,230

Simplest

One may use this as the simplest presentation of calculations, since all the amounts used in the formula are present in the working table.

If it is for verification purposes, we may avoid the formula column.

Please adopt a presentation based on the examination you are attending, the proportion of marks allotted and time available to/for the problem.