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Lesson-26
Learning Objectives
• SQ =Standard Quantity
• SR = Standard Rate
• AQ = Actual Quantity
• AP = Actual Price
• RSQ = Resaved STD Quantity
• MCV = Material Cost Variance
• MUV = Material Usage Variance
• MPV = Material Price Variance
• MMV = Material Mix Variance
• MYV = Material Yield Variance
Problem 1
Product SQ SP AQ AP
(Units) (Rs.) (Units) (Rs.)
Solution
2. MPV = AQ (SP-AP)
3. MUV = SP (SQ-AQ)
Problem 2
A 10 2 20 5 3 15
B 20 3 60 10 6 60
C 20 6 120 15 5 75
--- ----- --- -----
Total 50 200 30 150
--- ----- --- -----
Find out (1) MCV (2) MPV (3) MMV (4) MUV
A = (10 x 2) – (5 x 3) = 5F
C = (20 x 6) – (15 x 5) = 45 F
------
TOTAL = 50 F
------
(2) MPV = (SP – AP) AQ
A = (2 - 3) 5 = 5A
B = (3 - 6) 10 = 30 A
C = (6 - 5) 15 = 15 F
--------
TOTAL = 20 (A)
In this total std. mix and total actual mix is difference in proportion. Now you should calculated
revised STD’s.
RSQ = SQ
---- x TAQ
TSQ
10
A = ---- x 30 = 6
50
20
B = ---- x 30 = 12
50
20
C = ---- x 30 = 12
50
Now MMV
A = (6-5) x 2 = 2F
B = (12-10) x 3 = 6F
C = (12-15) x 6 = 18 A
--------
10 (A)
--------
A = (10 – 5) x 2 = 10 F
4
B = (20 – 10) x 3 = 30 F
C = (20 – 15) x 6 = 30 F
------
70 F
------
Verification
50 F = 20 A + 70 (F)
50 F = 50 F
Problem 3
Standards Actuals
Solution
SQ
RSQ = ---- x TAQ
TSQ
500
P = ----- x 1300 = 541.67 kgs
1200
Q = 400
----- x 1308 = 433.33 kgs
1200
R = 300
----- x 1300 = 325 kgs
1200
MMV
P= (541.67- 400) 6 = 850 F
You may observe in the standard quantity and normal loss the actual input and actual output. Since
the actual output is different, you calculate as follows.
5400
= --------- = 5 Per Unit
1080
Problem 4
A standard loss of 10 % is expected in production. During a period, there is used 90 tons of material
A at the cost of Rs. 180 per ton, 110 tons material B at the cost of Rs. 340 per ton.
Solution
Working Notes
B = 110 Tons
-----------------
200 Tons
-----------------
Standard Quantity is
A= 200 x 40% = 80
Less: 10%
Normal Loss 20 Actual 18
----- Loss ----
180 182
----- ----
RSQ = SR
---- x TAQ
TSQ
A = 80
---- x 200 = 80
200
B = 120
----- x 120 = 120
200
3. Material Yield Variance = (STD Loss – Actual Loss) Avg. Std. Price
52.000
= --------- = 2.88
180
Problem 5
Rai Industries Ltd. produces an article by using two kinds of material. It operates at standard costing
and the following standards have been set for raw materials:
A 46 % Rs. 4.00
B 60% 3.00
The standard loss in processing is 15%. During April 2003, the company produced net 1700 kgs of
finished product.
The position of stock and purchases for the month of April 2003 is as follows:
Assume that material is issued on FIFO method. The opening stock was valued on standard price.
Solution
Working Notes
It is extent to 85 %
B = 2000 x 60
---- = 1200 kgs
100
Material A:
Op. Stock = 35 x 4 (Std. Rate) = 140.00
3. Material Yield Variance = (Stand. loss – Actual loss) Avg. Std. Price
2020 =?
1700
------ x 2020 = 1717
2000