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CA INTERMEDIATE: COSTING & FM · STANDARD COSTING

Material variances: price, usage and cost

Sign convention: positive = Favourable (F), negative = Adverse (A). MPV = (SP − AP) × AQ; MUV = (SQ − AQ) × SP; MCV = SC − AC = MPV + MUV.

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Worked examples

Example 1 · level 1

Patel Packaging — Standard: 1,800 kg @ ₹49 per kg for the actual output. Actual: 1,850 kg purchased and used @ ₹43 per kg. Find the material price variance.

  1. ₹11,100 (F)
  2. ₹11,100 (A)
  3. ₹10,800 (A)
  4. ₹10,800 (F)
Show solution
  1. MPV = (49 − 43) × 1,850 = 11,100 → ₹11,100 (F).
  2. Actual price is lower than standard, so it is favourable.

Answer: ₹11,100 (F)

Example 2 · level 2

Nair Spices Pvt Ltd — Standard: 2,150 kg @ ₹65 per kg for the actual output. Actual: 1,950 kg purchased and used @ ₹70 per kg. Find the material usage (quantity) variance.

  1. ₹14,000 (A)
  2. ₹13,000 (F)
  3. ₹13,000 (A)
  4. ₹14,000 (F)
Show solution
  1. MUV = (2,150 − 1,950) × 65 = 13,000 → ₹13,000 (F).

Answer: ₹13,000 (F)

Example 3 · level 3

Mehta Polymers — Standard: 3,700 kg @ ₹28 per kg for the actual output. Actual: 3,475 kg purchased and used @ ₹29 per kg. Find the material cost variance.

  1. ₹2,825 (F)
  2. ₹3,475 (A)
  3. ₹2,825 (A)
  4. ₹6,300 (F)
Show solution
  1. MCV = ₹1,03,600 − ₹1,00,775 = 2,825 → ₹2,825 (F).
  2. Check: MPV ₹3,475 (A) + MUV ₹6,300 (F) = ₹2,825 (F).

Answer: ₹2,825 (F)

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