Material Variances knowing standard and actual quantity, and only standard price for different outputs using a single material
Problem 4
| Standard Price of material | 5 per lb |
| Standard Quantity | 10 lbs of material per unit of output |
| Standard Production: | 100 units |
| Actual Production: | 90 units |
| Actual Material Used: | 1,180 lbs |
Find Material Variances.
| 1 | |
|---|---|
| MYV/MSUV MMV | − 1,400 0 |
| MQV/MUV | − 1,400 |
Working Notes
The following data could be picked up from the problem
There are two outputs for which standards can be assumed from the given data.
| Standard | Standard | |||
|---|---|---|---|---|
| SQ | SP | SQ | SP | |
| Material 1 | 10 | 5 | 1,000 | – |
| Output | 1 | 100 | ||
units : _Q in lbs, _P in value/lb and _O in units
Multiple Standards
Knowing standard quantity for unit output and the standard production would enable us to calculate two standards and make use of those as well in the working table.
| Standard | Standard | |||
|---|---|---|---|---|
| SQ | SP | SQ | SP | |
| Material | 10 | 5 | 1,000 | 5 |
| Output | 1 | 100 | ||
Using the standards relating to 1 unit output would be the most convenient.
Note
We need SC(AO), SC(AI), SC(AQ) and AC to calculate all possible variances.
We will not be able to ascertain AC (= AQ × AP) as it is dependent on the actual price (AP) which is not known. As such those variances which have AC in their formula cannot be calculated.
- MCV = SC(AO) − AC
- MPV = SC(AQ) − AC
The rest of the variances can be calculated using the other values that can be obtained with the available data.
Since for a single material, Mix variance is irrelevant, we will be able to calculate only the Quantity/Usage variance.
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 | 0.9 | 1.18 | ||||||||
| Material 1 | 1,000 | 5 | 900 | 4,500 | 1,180 | 5,900 | 1,180 | 5,900 | ||
| Total | 1,000 | 900 | 4,500 | 1,180 | 5,900 | 1,180 | 5,900 | |||
| Output | 100 SO | 90 SO(AO) | 118 SO(AI) | 90 AO | ||||||
Output (_O) is in units, Quantities (_Q) and Losses (_L) are in lbs, Prices (_P) are in monetary value per lb and Costs (_C) are in monetary values.
Standard Output
| SO | = | 100 unit (given) |
Actual Output
| AO | = | 90 unit (given) |
| (AO) | = |
| ||
| = |
| |||
| = | 0.9 |
| (AI) | = |
| ||
| = |
| |||
| = |
| |||
| = | 1.18 |
| 1. | SQ(AO) | = | SQ ×
| ||
| = | SQ × 0.9 |
2. SC(AO) = SQ(AO) × SP
3. SO(AO) = AO
| 4. | SQ(AI) | = | SQ ×
| ||
| = | SQ × 1.18 |
5. SC(AI) = SQ(AI) × SP
| 6. | SO(AI) | = | SO ×
|
7. SC(AQ) = AQ × SP
Solution
Material Quantity/Usage Variance
MQV/MUV = SC(AO) − SC(AQ)
| = | 4,500 − 5,900 | = | − 1,400 [Adv] |
Material Mix Variance
MMV = SC(AI) − SC(AQ)
| = | 5,900 − 5,900 | = | 0 |
Material Yield/Sub-Usage Variance
MYV/MSUV = SC(AO) − SC(AI)
| = | 4,500 − 5,900 | = | − 1,400 [Adv] |
Solution (alternative presentation)
| Material 1 | |
|---|---|
| MYV/MSUV SC(AO) 4,500 − − SC(AI) 5,900 SC(AI) 5,900 − − SC(AQ) 5,900 | − 1,400 0 |
| MQV/MUV SC(AO) 4,500 − − SC(AQ) 5,900 | − 1,400 |
Verification
Verification
| Formula | Material 1 | |
|---|---|---|
| MYV/MSUV + MMV | SC(AO) − SC(AI) SC(AI) − SC(AQ) | − 1,400 0 |
| MQV/MUV | SC(AO) − SC(AQ) | − 1,400 |
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.