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CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis

For a month, the standard material cost of actual output was Rs 90,000 and the actual material cost was Rs 93,600. The material price variance was Rs 2,400 Favourable. What was the material usage variance?

The material usage variance is Rs 6,000 Adverse. The total material cost variance is Rs 3,600 adverse (standard 90,000 against actual 93,600). Since price variance was Rs 2,400 favourable, usage variance must be Rs 6,000 adverse so that the two combine to Rs 3,600 adverse.

  1. ARs 6,000 AdverseCorrect
  2. BRs 1,200 Adverse
  3. CRs 3,600 Adverse
  4. DRs 6,000 Favourable

Explanation

Total material cost variance = 90,000 - 93,600 = Rs 3,600 Adverse. Total = price variance + usage variance, so usage = 3,600 A - 2,400 F = Rs 6,000 Adverse. Check: 2,400 F + 6,000 A = 3,600 A. Rs 3,600 A ignores the price variance.

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