# SMU MBA ASSIGNMENTS

## 1 ton of material input yields standard output of 1,00,000 units. The standard price of material is Rs. 20 per kg. The actual quantity of material use is 10 tons and the actual price paid is Rs. 21 per kg. Actual output obtained is 9,00,000 units. Compute Material Variances.

December 02, 2017 By: Meliza Category: 1st SEM

1 ton of material input yields standard output of 1,00,000 units. The standard price of material is Rs. 20 per kg. The actual quantity of material use is 10 tons and the actual price paid is Rs. 21 per kg. Actual output obtained is 9,00,000 units. Compute Material Variances.

From the above find:

1. i) Material Cost Variance
2. ii) Material Price Variance

iii) Material Usage Variance

Budgeted (100000)                Standard (900000)                 Actual (900000)

Ton    Rate   Amount        Ton    Rate   Amount        Ton    Rate   Amount

1        20      20               9        20      180             10      21      210

(i) Material Cost Variance

It is the difference between the standard cost of materials allowed for the actual output and the actual cost of materials used. It may be expressed as:

= standard cost of materials – actual cost of materials used

= 180-210

1. ii) Material Price Variance

Under Material price variance, the price paid for materials is different from the pre-determined price. It is calculated by multiplying the actual quantity of materials used with the difference between standard and actual prices. The formula is :

Material Price Variance = (Standard Price – Actual Price) x Actual quantity used.

MPV = (SP – AP) AQ

= (Rs.20- Rs.21) * 10 tons

iii) Material Usage Variance

It is also known as material quantity variance or efficiency variance. It is that portion of material cost variance which measures the difference in material cost arising from higher or less a consumption of materials than the standard material consumption for the actual output. It is calculated by multiplying the standard price with the difference between the standard and actual quantitative of materials:

= standard unit price (standard usage – actual usage)

= 20 (9-10)

=20 (-1)

=-20 A