CMA Final · Strategic Cost Management · Variance Analyses
Sundaram Fabrics budgeted to produce 5,000 metres of cloth at a standard of 2 kg of yarn per metre at Rs 80 per kg. Actual output was 5,200 metres, using 10,600 kg of yarn bought at Rs 78 per kg. What is the material usage (quantity) variance?
The material usage variance is Rs 16,000 Adverse. Standard quantity for 5,200 metres is 10,400 kg, but 10,600 kg were used, so 200 kg excess is valued at the standard price of Rs 80 per kg.
- ARs 16,000 AdverseCorrect
- BRs 16,000 Favourable
- CRs 21,200 Favourable
- DRs 8,000 Adverse
Explanation
Standard quantity for actual output = 5,200 x 2 = 10,400 kg. Usage variance = (10,400 - 10,600) x Rs 80 = Rs 16,000 Adverse. Rs 21,200 Favourable is the price variance (80-78) x 10,600, not usage.
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