Material Variances - Single Material - Same Standard Actual output

S1 ↞ Pr1

Practice Problem 2

The standard cost card of a manufacturer shows the following details relating to the materials:

Standard Price = 2 per unit

Standard quantity = 4,000 units

Actual price = 2.50 per unit.

Actual usage of materials = 4,100 units.

Calculate Material Variances.

Ans:
1
MYV/MSUV
MMV 		− 200
0
MQV/MUV
MPV 		− 200
− 2,050
MCV − 2,250

Working Notes

The following data could be picked up from the problem

Standard Actual
SQ SP AQ AP
Material 1 4,000 2 4,100 2.50
Output 1 1

units : _Q in kgs, _P in value/kgs 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 1.025
Material 1 4,000 2 4,000 8,000 4,100 8,200 4,100 2.5 10,250 8,200
Total 4,000 4,000 8,000 4,100 8,200 4,100 10,250 8,200
Output 1
SO 		1
SO(AO) 		1.03
SO(AI) 		1
AO

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

Standard Output

SO = 1 no (given)

Actual Output

AO = 1 no (given)
(AO) =
AO
SO
=
1
1
= 1
(AI) =
AI
SI
=
AQMix
SQMix
=
4,100
4,000
= 1.025
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 × 1.025

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

= 8,000 − 10,250 = − 2,250 [Adv]

Material Price Variance

MPV = SC(AQ) − AC

= 8,200 − 10,250 = − 2,050 [Adv]

Material Quantity/Usage Variance

MQV/MUV = SC(AO) − SC(AQ)

= 8,000 − 8,200 = − 200 [Adv]

Material Mix Variance

MMV = SC(AI) − SC(AQ)

= 8,200 − 8,200 = 0

Material Yield/Sub-Usage Variance

MYV/MSUV = SC(AO) − SC(AI)

= 8,000 − 8,200 = − 200 [Adv]

Solution (alternative presentation)

Material 1
MYV/MSUV

SC(AO)
8,000
−
−
SC(AI)
8,200
+ MMV

SC(AI)
8,200
−
−
SC(AQ)
8,200


− 200


0
MQV/MUV

SC(AO)
8,000
−
−
SC(AQ)
8,200
+ MPV

SC(AQ)
8,200
−
−
AC
10,250


− 200


− 2,050
MCV

SC(AO)
8,000
−
−
AC
10,250


− 2,250

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) 		− 200
0
MQV/MUV
+ MPV 		SC(AO) − SC(AQ)
SC(AQ) − AC 		− 200
− 2,050
MCV SC(AO) − AC − 2,250

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 ↠ Pr3