Question

The following information is available from the books of a manufacturin company which uses three types of materials for production:

Material	Standard			Actual
	Quantity (Kgs)	Price (Rs.)	Total (Rs.)	Quantity (Kgs)	Price (Rs.)	Total (Rs.)
X	2,500	6.00	15,000	2,000	6.00	12,000
Y	2,000	3.75	7,500	2,500	3.60	9,000
Z	1,500	3.00	4,500	2,000	2.80	5,600
	6,000			6,500	(Actual loss)
Less: 10% Normal Loss	600			1,100
	5,400		27,000	5,400		26,600

Calculate:
(a) Material Cost Variance,
(b) Material Price Variance,
( c) Material Usage Variance,
( d) Material Mix Variance,
( e) Material Yield Variance.

Answer 1

Material	Standard			Actual			Standard Proportion of Actual Input (kgs.)
	Qty.	Price(Rs.)	Total(Rs.)	Qty.	Price(Rs.)	Total(Rs.)
X	2,500	6.00	15,000	2,000	6.00	12,000	2,708.33
Y	2,000	3.75	7,500	2,500	3.60	9,000	2,166.67
Z	1,500	3.00	4,500	2,000	2.80	5,600	1,625.00
	6,000		27,000	6,500		26,600	6,500.00

(a) Material Cost Variance (MCV) : (SQ x SP) - (AQ x AP)
Material-X = 15,000 (-) 12,000 = Rs. 3,000 (F)
Material-Y = 7,500 (-) 9,000 = Rs. 1,500 (A)
Material- Z = 4,500 (-) 5,600 = Rs. 1,100 (A)
Rs. 400 (F)

(b) Material Price Variance (MPV): (SP-AP) x AQ
Material-X = (6 - 6) x 2,000 = Rs. Nil
Material - Y = (3.75 - 3.60) x 2,500 = Rs. 375 (F)
Material - Z = (3.00 - 2.80) x 2,000 = Rs. 400 (F)
Rs. 775 (F)

(c) Material Usage Variance (MUV): (SQ-AQ) x AP
Material - X = (2,500 - 2,000) x 6.00 = Rs. 3,000 (F)
Material - Y = (2,000 - 2,500) x 3.75 = Rs. 1,875 (A)
Material - Z = (1,500 - 2,000) x 3.00 = Rs. 1,500 (A)
Rs. 375 (A)

(d) Material Mix Variance (MMV): SP x Difference in Mix
Material - X = 6 x (2708.33 - 2,000) = Rs. 4,250 (F)
Material - Y = 3.75 x (2166.67 - 2,500) = Rs 1,250 (A)
Material- Z = 3 x (1,625 - 2,000) = Rs. 1,125 (A)
Rs. 1,875 (F)

(e) Material Yield Variance (MYV): Std. Yield Rate x Difference in Yield.
Std. Yield Rate = `(27,000)/(5,400)` = Rs. 5
= 5 x (5,400 - 5,850) = Rs 2,250 (A)