Solution » Working Table

The given data arranged in the form of a working table Standard [Output: 1 unit] Actual [Output: 1 unit] Quantity (kgs) Price Rs/kg Value/Cost (Rs) Quantity (kgs) Price Rs/kg Value/Cost (Rs) 200 10 2,000 190 12 2,280 Total 200   2,000 190   2,280 SP(SO) = SCMix SO ⇒ SP(SO) = Rs. 2,000 1 unit ⇒ SP(SO) = Rs. 2,000/unit Assumptions: In the absence of details relating to production, it is assumed that the standard data and the actual data pertain to the same production level, which is taken to be 1 unit. Formulae Review and Complete Illustration

Solution » Calculations

• Material Cost Variance Study Notes ⇒ MCV = ({ AO SO × SQ } × SP ) − (AQ × AP) = ({ 1 unit 1 unit × 200 kgs } × Rs. 10/kg ) − (190 kgs × Rs. 12/kg) = ({1 × 200} × Rs. 10) − (190 × Rs. 12) = (Rs. 2,000) − (Rs. 2,280) = − Rs. 280 ⇒ MCV = − Rs. 280 [Adv] • Material Price Variance Study Notes ⇒ MPV = AQ (SP − AP) = 190 kgs (Rs. 10/kg − Rs. 12/kg) = 190 kgs (− Rs. 2/kg) = − Rs. 380 ⇒ MPV = − Rs. 380 [Adv] • Material Usage/Quantity Variance Study Notes MUV/MQV = ({ AO SO × SQ } − AQ ) × SP = ({ 1 unit 1 unit × 200 kgs } − 190 kgs ) × Rs. 10/kg = ({1 × 200 kgs} − 190 kgs) × Rs. 10/kg = (200 kgs − 190 kgs) × Rs. 10/kg = (10 kgs) × Rs. 10/kg = + Rs. 100 ⇒ MUV/MQV = + Rs. 100 [Fav] • Material Mix Variance Study Notes Since there is only one type of material being used, there will be no Mix Variance i.e. MMV = 0 • Material Yield/Sub-Usage Variance Study Notes MYV = (AO − { AQMix SQMix × SO} ) × SP(SO) = (1 unit − { 190 kgs 200 kgs × 1 unit} ) × Rs. 2,000/unit = (1 unit − {0.95 × 1 unit} ) × Rs. 2,000/unit = (1 unit − 0.95 units) × Rs. 2,000/unit = (+ 0.05 units) × Rs. 2,000/unit = + Rs. 100 ⇒ MYV/MSUV = + Rs. 100 [Fav] Alternatively Since Material Mix Variance is zero all usage variance is yield variance i.e. MYV = MUV/MQV . MUV/MQV = MMV + MYV/MSUV = 0 + MYV/MSUV = MYV/MSUV Therefore, MYV/MSUV = + Rs. 100 [Fav]

Solution » Verification

MCV = MPV + MUV/MQV Using the above data we get, (− Rs. 280) = (− Rs. 380) + (+ Rs. 100) ⇒ − Rs. 280 = − Rs. 280 → TRUE. MUV/MQV = MMV + MYV/MSUV Using the above data we get, (+ Rs. 100) = (0) + (+ Rs. 100) ⇒ + Rs. 100 = + Rs. 100 → TRUE. MCV = MPV + MMV + MYV/MSUV Using the above data we get, (− Rs. 280) = (− Rs. 380) + (0) + (+ Rs. 100) ⇒ − Rs. 280 = − Rs. 280 → TRUE.

Credit : Sudheer Doppalapudi