Skip to content

CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis

Kaveri Plastics buys material at a standard price of Rs 50 per kg and computes the price variance at the time of purchase. In a month it bought 10,000 kg at Rs 52 per kg and issued 8,000 kg to production. The standard quantity for actual output was 7,800 kg. What is the total of the material price and material usage variances for the month?

The total is Rs 30,000 Adverse. Price variance is measured on the 10,000 kg purchased: 2 x 10,000 = Rs 20,000 adverse. Usage variance is 200 kg excess over the standard 7,800 kg at Rs 50, which is Rs 10,000 adverse. Together they equal Rs 30,000.

  1. ARs 30,000 AdverseCorrect
  2. BRs 26,000 Adverse
  3. CRs 20,000 Adverse
  4. DRs 10,000 Adverse

Explanation

Price variance at purchase = (50 - 52) x 10,000 = Rs 20,000 A. Usage variance = (7,800 - 8,000) x 50 = Rs 10,000 A. Total = Rs 30,000 Adverse. Rs 26,000 results from computing price variance only on the 8,000 kg used (16,000) instead of on the quantity purchased.

Did you get it right without looking?

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

Practise Standard Costing and Variance AnalysisFree diagnostic mock

More Standard Costing and Variance Analysis questions