CA Intermediate · Cost and Management Accounting · Standard Costing
Kaveri Plastics set a standard of 4 kg of resin per unit of output at Rs 50 per kg. In March it produced 1,000 units, using 4,200 kg of resin that cost Rs 48 per kg. What is the material usage (quantity) variance?
The material usage variance is Rs 10,000 Adverse. Standard quantity for 1,000 units is 4,000 kg, but 4,200 kg were used, so 200 kg of excess use is valued at the standard price of Rs 50 per kg, which gives Rs 10,000 adverse.
- ARs 10,000 AdverseCorrect
- BRs 10,000 Favourable
- CRs 8,400 Favourable
- DRs 8,400 Adverse
Explanation
Standard quantity for actual output = 1,000 x 4 = 4,000 kg. Usage variance = (SQ - AQ) x SP = (4,000 - 4,200) x 50 = Rs 10,000 Adverse. Rs 8,400 Favourable is the price variance (50-48) x 4,200, which is a different variance.
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