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CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis

Standard for one unit of a product is 5 kg of material at Rs 20 per kg. In a period 1,000 units were produced, using 5,300 kg of material bought at Rs 19 per kg. What is the material usage variance?

The material usage variance is Rs 6,000 Adverse. The standard quantity for 1,000 units is 5,000 kg, while 5,300 kg were used, an excess of 300 kg. Valued at the standard price of Rs 20 per kg, the excess usage costs Rs 6,000.

  1. ARs 6,000 AdverseCorrect
  2. BRs 5,700 Adverse
  3. CRs 6,000 Favourable
  4. DRs 700 Adverse

Explanation

Standard quantity for actual output = 1,000 x 5 = 5,000 kg. Usage variance = (5,000 - 5,300) x Rs 20 standard price = Rs 6,000 Adverse. Valuing at actual price Rs 19 gives Rs 5,700, which is wrong. Rs 700 Adverse is the total material cost variance (6,000 A and price 5,300 F).

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