CMA Final · Strategic Cost Management · Variance Analyses
Kaveri Textiles budgeted 2,000 kg of yarn at Rs 150 per kg for producing 1,000 units. Actual output was 1,100 units, using 2,300 kg of yarn purchased and consumed at Rs 148 per kg. What is the material usage variance?
The material usage variance is Rs 15,000 adverse. Standard quantity for 1,100 units is 2,200 kg, but 2,300 kg were used, so 100 kg excess is valued at the standard price of Rs 150 per kg.
- ARs 15,000 AdverseCorrect
- BRs 15,000 Favourable
- CRs 4,600 Favourable
- DRs 30,000 Adverse
Explanation
Standard quantity for actual output = 2,000 x 1,100/1,000 = 2,200 kg. Usage variance = (2,200 - 2,300) x Rs 150 = Rs 15,000 Adverse. Rs 4,600 Favourable is the price variance (2,300 x Rs 2), not the usage variance.
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