Material Variances :: Problems : Single Material Losses Stocks

Problems » Solutions  
 
01. The standard cost card shows the following details relating to the materials needed to produce 1 kg. if groundnut oil:

Quantity of groundnut = 4 kg.
Price of groundnut = Rs. 2. 45 per kg

Actual production data:
Production during a week = 1,000 kg
Quantity used = 4,600 kg.
Price of groundnut = Rs. 2. 75 per kg.
Calculate all possible material variances:

Solution
[MCV = − Rs. 2,850 ; MPV = − Rs. 1,380; MUV/MQV = − Rs. 1,470; MMV = 0 ; MYV/MSUV = − Rs. 1,470;]

02. A Ltd. Has introduced Standard Costing System and has furnished the following information:
Standard:
  Materials for 70 kg. of Finished Goods     100kg.
  Price of materialsRe.1 per kg.
Actual:
  Output2,10,000 kg.
  Material used2,80,000 kgs
  Cost of materialsRs.2,52,000
Calculate the various variances in respect of Material Cost.

Solution
[MCV = + Rs. 48,000 ; MPV = + Rs. 28,000; MUV/MQV = + Rs. 20,000; MMV = 0 ;MYV/MSUV = − + Rs. 20,000;]

03. Find out the Material Cost Variance, Material Price Variance and Material usage variance from the following :
Material Purchased
Value of Materials Purchased
Standard Quantity for one unit    
Standard Rate of Materials
Opening Stock of Materials
Closing Stock of Materials
Finished goods
4000 kg.
Rs. 10,000
2.5 kg.
Rs. 2 per kg.
1000 kg.
2000 kg.
1000 units.

Solution
[MCV = − Rs. 3,000 ; MPV = − Rs. 2,000; MUV/MQV = − Rs. 1,000; MMV = 0 ;MYV/MSUV = − Rs. 1,000;]

04. Calculate the material variances for the following:

Opening stock100 kgs
Purchased during the period     3,000 kg. cost Rs. 6,200
Standard2 kg. per unit at Rs. 2 per kg.
Original budget2,000 units
Production1,600
Sales1,400 units
Closing stock200 kg.

Solution
[MCV = + Rs. 400 ; MPV = − Rs. 200; MUV/MQV = + Rs. 600; MMV = 0 ;MYV/MSUV = − + Rs. 600;]

05. From the following you are required to calculate all possible material variances:

Quantity of material purchased : 8,000 lbs
Value of material purchased : Rs. 56,000.
Standard of quantity of material required for one unit of finished product : 35 lbs.
Standard rate of material : Rs. 6.50 per lb.
Opening stock of material : 1,250 lbs
Finished production during the period : 250 units

Solution
[MCV = − Rs. 7,250 ; MPV = − Rs. 4,000; MUV/MQV = − Rs. 3,250; MMV = 0 ; MYV/MSUV = − Rs. 3,250;]

06. From the following you are required to calculate material variances:

Quantity of material purchased : 3,000 units
Value of material purchased : Rs. 9,000.
Standard of quantity of material required for one Tonne of finished product : 25 units.
Standard rate of material : Rs. 2 per unit.
Opening stock of material : nil
Closing stock of material : 500 units
Finished production during the period : 80 tonnes

Solution
[MCV = − Rs. 4,000 ; MPV = − Rs. 3,000; MUV/MQV = − Rs. 1,000; MMV = 0 ;MYV/MSUV = − Rs. 1,000;]

07. Standards set for material consumption in the manufacture of a product was 500 kgs @ Rs. 4.50 per kg.
In a cost period:

Opening stock was 500 kg @ 4.50 per kg.
Purchases made 2,500 kg @ 5 per kg.
Consumption 650 kg.

Calculate

  1. Cost Variance
  2. Usage Variance
  3. Price Variance, when it is calculated
    1. during the period of purchase
    2. during the period of issue on FIFO basis
    3. during the period of issue on LIFO basis.
  4. Mix Variance
  5. Yield Variance
What would be the effect of such valuations on closing stock valuation?.

Solution
[MCV = − Rs. 1,925; MPV = − Rs. 1,250; MUV/MQV = − Rs. 675; MMV = 0 ;MYV/MSUV = − Rs. 675;]

08. ABC (P) Ltd., uses a standard costing system, with its material stock account being maintained at standard costs. The following details have been extracted from the standard cost card in respect of direct materials.
8 kg at Rs. 8.00/kg = Rs. 64 per unit
Budgeted production in January was 1,250 units.
The following details relate to actual materials purchased and issued to production during January, when actual production was 1,200 units.
Material purchased 8200 kg costing Rs. 68,880
Materials issued to production 7125 kg.
Find the material variances to be reported.

Solution
[MCV = + Rs. 16,520; MPV = − Rs. 3,280; MUV/MQV = + Rs. 19,800; MMV = 0 ;MYV/MSUV = + Rs. 19,800;]

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