Material Variances knowing standard quantity, and price and actual quantity, and cost for different outputs using a single material
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.
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 | = |
| ||
= |
| |||
= | 3.1 |
Working Table
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) | = |
| ||
= |
| |||
= | 300 |
(AI) | = |
| ||
= |
| |||
= |
| |||
= | 330 |
1. | SQ(AO) | = | SQ ×
| ||
= | SQ × 300 |
2. SC(AO) = SQ(AO) × SP
3. SO(AO) = AO
4. | SQ(AI) | = | SQ ×
| ||
= | SQ × 330 |
5. SC(AI) = SQ(AI) × SP
6. | SO(AI) | = | SO ×
|
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 SC(AI) 9,900 − − SC(AQ) 9,900 | − 900 0 |
MQV/MUV SC(AO) 9,000 − − SC(AQ) 9,900 SC(AQ) 9,900 − − AC 10,230 | − 900 − 330 |
MCV SC(AO) 9,000 − − AC 10,230 | − 1,230 |
Verification
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.