CMA Final · Strategic Cost Management · Variance Analyses
Ananya Foods Ltd. budgeted to produce 10,000 units of a snack at a standard material cost of 2 kg per unit at Rs 50 per kg. Actual output was 9,000 units, using 19,000 kg of material bought and used at Rs 48 per kg. What is the material price variance?
The material price variance is Rs 38,000 Favourable. The standard price of Rs 50 exceeds the actual price of Rs 48 by Rs 2, and this saving applies to all 19,000 kg actually purchased and used, giving 2 x 19,000 = Rs 38,000.
- ARs 38,000 FavourableCorrect
- BRs 38,000 Adverse
- CRs 20,000 Favourable
- DRs 20,000 Adverse
Explanation
Price variance = (SP - AP) x actual quantity = (50 - 48) x 19,000 = Rs 38,000 Favourable. The distractor of Rs 20,000 Adverse is the usage variance on the 1,000 kg excess (19,000 - 18,000) at Rs 50 = Rs 50,000, so it is not even that; the Rs 38,000 Adverse option only has the wrong sign.
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