Material Variances knowing standards and actuals for the same output using a single material

S1

Problem 1

In manufacturing a product GERBER, the standard quantity of material was fixed at 10 kg and the standard price was 200 per kg. The actual quantity consumed was 12 kg and the actual price was 190 per kg. Calculate all possible Material variances.

Ans:
1
MYV/MSUV
MMV 		− 400
0
MQV/MUV
MPV 		− 400
+ 120
MCV − 280

Working Notes

The following data could be picked up from the problem

Standard Actual
SQ SP AQ AP
Material 1 10 200 12 190
Output 1 1

units : _Q in kgs, _P in value/kg and _O in units

Assumptions:

  • The standards and actuals given are for the same output, assumed to be 1 unit here.

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 1 1.2
Material 1 10 200 10 2,000 12 2,400 12 190 2,280 2,400
Total 10 10 2,000 12 2,400 12 2,280 2,400
Output 1
SO 		1
SO(AO) 		1.2
SO(AI) 		1
AO

Output (_O) is in units, Quantities (_Q) and Losses (_L) are in kgs, Prices (_P) are in monetary value per kg and Costs (_C) are in monetary values.

Standard Output

SO = 1 unit (given)

Actual Output

AO = 1 unit (given)
(AO) =
AO
SO
=
1
1
= 1
(AI) =
AI
SI
=
AQMix
SQMix
=
12
10
= 1.2
1. SQ(AO) = SQ ×
AO
SO
= SQ × 1

2. SC(AO) = SQ(AO) × SP

3. SO(AO) = AO

4. SQ(AI) = SQ ×
AI
SI
= SQ × 1.2

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

= 2,000 − 2,280 = − 280 [Adv]

Material Price Variance

MPV = SC(AQ) − AC

= 2,400 − 2,280 = + 120 [Fav]

Material Quantity/Usage Variance

MQV/MUV = SC(AO) − SC(AQ)

= 2,000 − 2,400 = − 400 [Adv]

Material Mix Variance

MMV = SC(AI) − SC(AQ)

= 2,400 − 2,400 = 0

Material Yield/Sub-Usage Variance

MYV/MSUV = SC(AO) − SC(AI)

= 2,000 − 2,400 = − 400 [Adv]

Solution (alternative presentation)

Material 1
MYV/MSUV

SC(AO)
2,000
−
−
SC(AI)
2,400
+ MMV

SC(AI)
2,400
−
−
SC(AQ)
2,400


− 400


0
MQV/MUV

SC(AO)
2,000
−
−
SC(AQ)
2,400
+ MPV

SC(AQ)
2,400
−
−
AC
2,280


− 400


+ 120
MCV

SC(AO)
2,000
−
−
AC
2,280


− 280

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) 		− 400
0
MQV/MUV
+ MPV 		SC(AO) − SC(AQ)
SC(AQ) − AC 		− 400
+ 120
MCV SC(AO) − AC − 280

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 ↠ P2