Standard Costing and Variance Analysis Illustration No.1 From the following particulars calculate (a) material cost variance (b) material price variance and (c) material usage variance: Standard quantity of materials required per tonne of output_ 60 units_ Solution : Materials consumed = 6000 – 1000 = 5000 units Actual rate of material = 180006000 = Rs.3 per unit = Rs.5.00 x 9600 – Rs.3 x 5000 Illustration 2 A manufacturing concern which has adopted standard costing furnished the following information : Standard : Actual : Calculate : Material usage variance Material price variance Material cost variance Solution : = 2,80,000 x 0.20 = Rs. 56,000 (Favorable) = (SQ x SP) – (AQ x AP) = (3,00,000 x 2) – (2,80,000 x 1.8) = 6,00,000 – 5,04,000 = Rs.96,000 (Favorable) Working Notes Standard quantity : Material for 70 kg of finished products : 100 kg 2,10,000 kg of finished products 2,10,000 x 10070 = 3,00,000 kg Illustration 3 The standard cost card for a product shows : Material cost 2 kg @ Rs.2.50 each, Rs.5.00 per unit The actuals which have emerged from business operations are as follows: Production 8,000 units Materials consumed 16,500 kg @ Rs.2.40 each Rs.39,600 Calculate appropriate material and labor variances. Solution : Actual hours) = 0.50 x (16,000 – 18,000) = Rs.1,000 (Adverse) Based on the following data compute the material price and usage variances. The total cost of materials EX, Y, ZEE purchased (and consumed) at actual prices: Rs.12,344. Actual quantities purchased and consumed of the three distinct raw materials and their standard costs were: The standard cost of realized production based on standard prices and usage is Rs.12,000. Solution: Standard material cost at sta ...