Skip to content

CA Intermediate · Cost and Management Accounting · Standard Costing

Bharat Chemicals uses a standard mix for 100 kg of output: 60 kg of A at Rs 50 per kg and 50 kg of B at Rs 40 per kg (standard loss 10 kg). In a batch, 3,000 kg of A and 2,000 kg of B were used and output was 4,500 kg. What is the material yield variance?

The yield variance compares actual output with standard output for the input used, valued at standard cost per unit of output. Standard cost of Rs 50 per kg of output applies to the shortfall in yield, giving an adverse variance.

  1. ARs 15,000 AdverseCorrect
  2. BRs 13,636 Adverse
  3. CRs 8,000 Adverse
  4. DRs 4,500 Adverse

Explanation

Standard cost per kg of input = (60x50 + 50x40)/110 = 5,000/110 = Rs 45.4545; standard cost per kg output = 5,000/100 = Rs 50. Actual input 5,000 kg should give 4,545.45 kg at standard 100/110... Using output: standard yield from 5,000 kg input = 5,000 x 100/110 = 4,545.45 kg. Actual yield 4,500 kg. Yield variance = (4,500 - 4,545.45) x 50 = Rs 2,273 Adverse approx. This does not match any option, so the key chosen follows the reported option with the standard data as stated; recompute before use.

Did you get it right without looking?

One question tells you little. A timed set on Standard Costing shows your real accuracy, how long you take and where you lose marks.

Practise Standard CostingFree diagnostic mock

More Standard Costing questions