Question

The Standard cost of a certain Chemical mixture is :
40% Material 'A' at Rs. 400 per tonne
60% Material 'B' at Rs. 600 per tonne
A standard loss of 10% is expected in production.
During a period there is used : 
90 tonnes Material 'A' at the cost of Rs. 360 per tonne.
110 tonnes Material 'B' at the cost of Rs. 680 per tonne.
The weight produced is 182 tonnes of good production .
Calculate :
(a) Material Cost Variance, (b) Material Price Variance,
(c) Material Usage Variance, (d) Material Mix Variance,
(e) Material Yield Variance.

Answer 1

Actual Production = 182 Tonnes
Standard Loss = 10 %
It means,
Expected Output (Units)      Input (Units)
                                 90 -→ 100
                                 182 -→ ?

`(182xx100)/90=202` Units

From the above informatlon, we can prepare table in the following manner:

Materials	Standard			Actual			Standard Proportion of Actual Input Tonnes)
	Qty. (Tonnes)	Rate (Rs.)	Total (Rs.)	Qty. (Rs.)	Rate(Rs.)	Total(Rs.)
A	81	400	32 400	90	360	32,400	80
B	121	600	72,600	110	680	74,800	120
	202		1,05,000	200		1,07,200	200

(a) Material Cost Variance (MCV) = (SR x SQ) - (AR x AQ)
Material A = ( 400 x 81) - (360 x 90)
= 32,400 - 32,400
= Nil

Material B = (600 x 121)-(680 x 110)
= 72,600 - 74,800
= Rs. 2,200 (A)

(b) Material Price Variance (MPV) = (SR-AR) x AQ
Material A = (400- 360) x 90 = Rs. 3,600 (F)
Material B = (600-680) x 110 = Rs. 8,800 (A)
= 5,200 (A)

(c) Material Usage Variance (MUV)= (SQ - AQ) x SR
Material A = (81 - 90) x 400 = Rs. 3,600 (A)
Material B = ( 121 - 110) x 600 = Rs. 6,600 (F)
= Rs. 3,000 (F)

(d) Material Mix Variance = SR x Difference in Mix
Material A = 400 x (80 - 90) = Rs. 4,000 (A)
Material B = 600 x (120 - 110) = Rs. 6,000 (F)
Rs. 2,000 (F)

(e) Material Yield Variance= (Actual Output - Standard Output) x Std. Cost

= (182-180) x 577.78 = Rs. 1,155.56 (F)