CMA Final · Strategic Cost Management · Variance Analyses
Aarav Plastics budgeted to produce 5,000 units of a moulded part using 2 kg of resin per unit at a standard price of Rs 80 per kg. Actual output was 5,200 units, using 10,600 kg of resin bought at Rs 78 per kg. What is the material price variance?
The material price variance is Rs 21,200 Favourable. It is the saving of Rs 2 per kg (standard Rs 80 less actual Rs 78) multiplied by the 10,600 kg actually used or purchased, and since actual price is below standard the variance is favourable.
- ARs 21,200 FavourableCorrect
- BRs 21,200 Adverse
- CRs 16,000 Favourable
- DRs 32,000 Adverse
Explanation
Price variance = (SP - AP) x actual quantity = (80 - 78) x 10,600 = Rs 21,200. Actual price is lower than standard, so it is favourable. Rs 16,000 would wrongly use the budgeted quantity of 10,000 kg... or a different base, and the adverse option has the wrong sign.
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