Skip to content

CA Intermediate · Cost and Management Accounting · Standard Costing

Sundaram Fabrics set a standard of 4 kg of yarn per unit at Rs 50 per kg. In March it produced 1,500 units, used 6,300 kg of yarn and paid Rs 52 per kg. What is the material usage (quantity) variance?

The material usage variance is Rs 15,000 Adverse. Standard quantity for 1,500 units is 6,000 kg, while 6,300 kg was used, so the excess 300 kg is valued at the standard price of Rs 50 per kg.

  1. ARs 15,000 AdverseCorrect
  2. BRs 15,000 Favourable
  3. CRs 12,600 Adverse
  4. DRs 12,600 Favourable

Explanation

Standard quantity for actual output = 1,500 x 4 = 6,000 kg. Usage variance = (SQ - AQ) x SP = (6,000 - 6,300) x 50 = Rs 15,000 Adverse. Using the actual price of Rs 52 would give Rs 15,600, which is wrong, and Rs 12,600 comes from using the price variance (6,300 x 2).

Did you get it right without looking?

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

Practise Standard CostingFree diagnostic mock

More Standard Costing questions