Material Variances - Single Material - Standard and Actual outputs different
Practice Problem 5
| Standard output | 600 units |
| Actual output | 540 units |
| Standard quantity per unit | 1 kg |
| Total actual quantity used | 600 kg. |
| Standard rate | 14 per kg |
| Actual rate | 15 per kg |
Calculate the material price variance, the materials usage variance, material cost variance, materials mixture variance and the material yield variance.
| 1 | |
|---|---|
| MYV/MSUV MMV | − 840 0 |
| MQV/MUV MPV | − 840 − 600 |
| MCV | − 1,440 |
Working Notes
The following data could be picked up from the problem
| Standard | Actual | |||
|---|---|---|---|---|
| SQ | SP | AQ | AP | |
| Material 1 | 1 | 14 | 600 | 15 |
| Output | 1 | 540 | ||
units : _Q in lbs, _P in value/lb and _O in units
Multiple Standards
From the given data, standards can be built for 1 unit as well as for the 600 units of standard output.
| Standard | Standard | |||
|---|---|---|---|---|
| SQ | SP | SQ | SP | |
| Material 1 | 1 | 1 | 600 | 600 |
| Output | 1 | 600 | ||
We may make use of any of the standard in the working table.
Using the standards relating to 1 unit output would be the most convenient.
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 | ||||||||
| Material 1 | 600 | 14 | 540 | 7,560 | 600 | 8,400 | 600 | 15 | 9,000 | 8,400 |
| Total | 600 | 540 | 7,560 | 600 | 8,400 | 600 | 9,000 | 8,400 | ||
| Output | 600 SO | 540 SO(AO) | 600 SO(AI) | 540 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 | = | 600 unit (given) |
Actual Output
| AO | = | 540 unit (given) |
| (AO) | = |
| ||
| = |
| |||
| = | 0.9 |
| (AI) | = |
| ||
| = |
| |||
| = |
| |||
| = | 1 |
| 1. | SQ(AO) | = | SQ ×
| ||
| = | SQ × 0.9 |
2. SC(AO) = SQ(AO) × SP
3. SO(AO) = AO
| 4. | SQ(AI) | = | SQ ×
| ||
| = | SQ × 1 |
5. SC(AI) = SQ(AI) × SP
| 6. | SO(AI) | = | SO ×
|
7. SC(AQ) = AQ × SP
Solution
Material Cost Variance
MCV = SC(AO) − AC
| = | 7,560 − 9,000 | = | − 1,440 [Adv] |
Material Price Variance
MPV = SC(AQ) − AC
| = | 8,400 − 9,000 | = | − 600 [Adv] |
Material Quantity/Usage Variance
MQV/MUV = SC(AO) − SC(AQ)
| = | 7,560 − 8,400 | = | − 840 [Adv] |
Material Mix Variance
MMV = SC(AI) − SC(AQ)
| = | 8,400 − 8,400 | = | 0 |
Material Yield/Sub-Usage Variance
MYV/MSUV = SC(AO) − SC(AI)
| = | 7,560 − 8,400 | = | − 840 [Adv] |
Solution (alternative presentation)
| Material 1 | |
|---|---|
| MYV/MSUV SC(AO) 7,560 − − SC(AI) 8,400 SC(AI) 8,400 − − SC(AQ) 8,400 | − 840 0 |
| MQV/MUV SC(AO) 7,560 − − SC(AQ) 8,400 SC(AQ) 8,400 − − AC 9,000 | − 840 − 600 |
| MCV SC(AO) 7,560 − − AC 9,000 | − 1,440 |
Verification
Verification
| Formula | Material 1 | |
|---|---|---|
| MYV/MSUV + MMV | SC(AO) − SC(AI) SC(AI) − SC(AQ) | − 840 0 |
| MQV/MUV + MPV | SC(AO) − SC(AQ) SC(AQ) − AC | − 840 − 600 |
| MCV | SC(AO) − AC | − 1,440 |
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.