CA Intermediate · Cost and Management Accounting · Standard Costing
Ananya Textiles budgeted 2,000 kg of yarn at a standard price of Rs 150 per kg for the month. It actually purchased 2,200 kg at Rs 156 per kg and used 2,100 kg to produce output whose standard usage was 2,000 kg. Material price variance (calculated on quantity purchased) is:
The material price variance is Rs 13,200 Adverse. The actual price of Rs 156 exceeds the standard Rs 150 by Rs 6 per kg, and this difference is applied to the 2,200 kg actually purchased, giving Rs 13,200 adverse.
- ARs 13,200 AdverseCorrect
- BRs 12,600 Adverse
- CRs 13,200 Favourable
- DRs 6,000 Adverse
Explanation
Price variance = (SP - AP) x actual quantity purchased = (150 - 156) x 2,200 = Rs 13,200 Adverse. Rs 12,600 wrongly uses the quantity used (2,100) instead of the quantity purchased. Rs 6,000 uses standard quantity (2,000).
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