Material Variances knowing standards and actuals for different outputs using a single material

S1 ↞ P1

Problem 2

Mankad Sons manufacture a product PRICEY. It is estimated that for each ton of material consumed 80 articles should be produced. The standard price per ton of material 12,300. During the first week of January, 120 tons of materials were issued for production, the price of which was 12,960 per ton. Production during the week was 9,240 articles. Compute the variances.

Ans:
1
MYV/MSUV
MMV 		− 55,350
0
MQV/MUV
MPV 		− 55,350
− 79,200
MCV − 1,34,550

Working Notes

The following data could be picked up from the problem

Standard Actual
SQ SP AQ AP
Material 1 1 12,300 120 12,960
Output 80
SO 		9,240
AO

units : _Q in tons, _P in value/ton and _O in articles

Working Table

Working table incorporating the data in the problem and the calculated values including recalculated standards
Working Table with recalculated standards
Standard Actual
for SO for AO for AI
SQ SP SQ(AO) SC(AO) SQ(AI) SC(AI) AQ AP AC SC(AQ)
Factor 115.5 120
Material 1 1 12,300 115.5 14,20,650 120 14,76,000 120 12,960 15,55,200 14,76,000
Total 1 115.5 14,20,650 120 14,76,000 120 15,55,200 14,76,000
Output 80
SO 		9,240
SO(AO) 		9,600
SO(AI) 		9,240
AO

Output (_O) is in articles, Quantities (_Q) and Losses (_L) are in tons, Prices (_P) are in monetary value per ton and Costs (_C) are in monetary values.

Standard Output

SO = 80 article (given)

Actual Output

AO = 9,240 article (given)
(AO) =
AO
SO
=
9,240
80
= 115.5
(AI) =
AI
SI
=
AQMix
SQMix
=
120
1
= 120
1. SQ(AO) = SQ ×
AO
SO
= SQ × 115.5

2. SC(AO) = SQ(AO) × SP

3. SO(AO) = AO

4. SQ(AI) = SQ ×
AI
SI
= SQ × 120

5. SC(AI) = SQ(AI) × SP

6. SO(AI) = SO ×
AI
SI

7. SC(AQ) = AQ × SP

Solution

Material Cost Variance

MCV = SC(AO) − AC

= 14,20,650 − 15,55,200 = − 1,34,550 [Adv]

Material Price Variance

MPV = SC(AQ) − AC

= 14,76,000 − 15,55,200 = − 79,200 [Adv]

Material Quantity/Usage Variance

MQV/MUV = SC(AO) − SC(AQ)

= 14,20,650 − 14,76,000 = − 55,350 [Adv]

Material Mix Variance

MMV = SC(AI) − SC(AQ)

= 14,76,000 − 14,76,000 = 0

Material Yield/Sub-Usage Variance

MYV/MSUV = SC(AO) − SC(AI)

= 14,20,650 − 14,76,000 = − 55,350 [Adv]

Solution (alternative presentation)

Material 1
MYV/MSUV

SC(AO)
14,20,650
−
−
SC(AI)
14,76,000
+ MMV

SC(AI)
14,76,000
−
−
SC(AQ)
14,76,000


− 55,350


0
MQV/MUV

SC(AO)
14,20,650
−
−
SC(AQ)
14,76,000
+ MPV

SC(AQ)
14,76,000
−
−
AC
15,55,200


− 55,350


− 79,200
MCV

SC(AO)
14,20,650
−
−
AC
15,55,200


− 1,34,550

Verification

If adopting the first and second presentation methods, it would help building the following table to enable us to verify whether our workings are correct or not.

Verification

Formula Material 1
MYV/MSUV
+ MMV 		SC(AO) − SC(AI)
SC(AI) − SC(AQ) 		− 55,350
0
MQV/MUV
+ MPV 		SC(AO) − SC(AQ)
SC(AQ) − AC 		− 55,350
− 79,200
MCV SC(AO) − AC − 1,34,550

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.

Author : The Edifier
S1 ↠ P3