Material Variances knowing standards and actuals for different outputs using a single material with input and output in different units
Problem 3
A furniture manufacturer uses Sunmica tops for tables. From the following information, find out Price variance, Usage variance and Joint variance.
| Standard Quantity of Sunmica per table | 4 sq. ft. |
| Standard price per sq. ft. of Sunmica | 5.00. |
| Actual production of tables | 1,000 |
| Sunmica actually used | 4,300 sq.ft. |
| Actual purchase price of Sunmica per sq. ft. | 5.50 |
Who is responsible for the above variances?
| 1 | |
|---|---|
| MYV/MSUV MMV | − 1,500 0 |
| MQV/MUV MPV | − 1,500 − 2,150 |
| MCV | − 3,650 |
Working Notes
The following data could be picked up from the problem
| Standard | Actual | |||
|---|---|---|---|---|
| SQ | SP | AQ | AP | |
| Sunmica | 4 | 5 | 4,300 | 5.5 |
| Output | 1 | 1,000 | ||
units : _Q in sq.ft, _P in value/sq.ft and _O in tables
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 | 1,000 | 1,075 | ||||||||
| Sunmica | 4 | 5 | 4,000 | 20,000 | 4,300 | 21,500 | 4,300 | 5.5 | 23,650 | 21,500 |
| Total | 4 | 4,000 | 20,000 | 4,300 | 21,500 | 4,300 | 23,650 | 21,500 | ||
| Output | 1 SO | 1,000 SO(AO) | 1,075 SO(AI) | 1,000 AO | ||||||
Output (_O) is in tables, Quantities (_Q) and Losses (_L) are in sq.fts, Prices (_P) are in monetary value per sq.ft and Costs (_C) are in monetary values.
Standard Output
| SO | = | 1 table (given) |
Actual Output
| AO | = | 1,000 table (given) |
| (AO) | = |
| ||
| = |
| |||
| = | 1,000 |
| (AI) | = |
| ||
| = |
| |||
| = |
| |||
| = | 1,075 |
| 1. | SQ(AO) | = | SQ ×
| ||
| = | SQ × 1,000 |
2. SC(AO) = SQ(AO) × SP
3. SO(AO) = AO
| 4. | SQ(AI) | = | SQ ×
| ||
| = | SQ × 1,075 |
5. SC(AI) = SQ(AI) × SP
| 6. | SO(AI) | = | SO ×
|
7. SC(AQ) = AQ × SP
Solution
Material Cost Variance
MCV = SC(AO) − AC
| = | 20,000 − 23,650 | = | − 3,650 [Adv] |
Material Price Variance
MPV = SC(AQ) − AC
| = | 21,500 − 23,650 | = | − 2,150 [Adv] |
Material Quantity/Usage Variance
MQV/MUV = SC(AO) − SC(AQ)
| = | 20,000 − 21,500 | = | − 1,500 [Adv] |
Material Mix Variance
MMV = SC(AI) − SC(AQ)
| = | 21,500 − 21,500 | = | 0 |
Material Yield/Sub-Usage Variance
MYV/MSUV = SC(AO) − SC(AI)
| = | 20,000 − 21,500 | = | − 1,500 [Adv] |
Solution (alternative presentation)
| Sunmica | |
|---|---|
| MYV/MSUV SC(AO) 20,000 − − SC(AI) 21,500 SC(AI) 21,500 − − SC(AQ) 21,500 | − 1,500 0 |
| MQV/MUV SC(AO) 20,000 − − SC(AQ) 21,500 SC(AQ) 21,500 − − AC 23,650 | − 1,500 − 2,150 |
| MCV SC(AO) 20,000 − − AC 23,650 | − 3,650 |
Verification
Verification
| Formula | Sunmica | |
|---|---|---|
| MYV/MSUV + MMV | SC(AO) − SC(AI) SC(AI) − SC(AQ) | − 1,500 0 |
| MQV/MUV + MPV | SC(AO) − SC(AQ) SC(AQ) − AC | − 1,500 − 2,150 |
| MCV | SC(AO) − AC | − 3,650 |
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.