CMA Final · Strategic Cost Management · Variance Analyses
Sundaram Foods Ltd budgeted to produce 4,000 units of a snack at a standard material usage of 2 kg per unit at Rs 50 per kg. Actual output was 4,200 units, using 8,600 kg of material bought and used at Rs 49 per kg. What is the material usage variance?
The material usage variance is Rs 10,000 Adverse. Standard quantity for 4,200 units is 8,400 kg, but 8,600 kg were used. The excess 200 kg is valued at the standard price of Rs 50, giving Rs 10,000 adverse.
- ARs 10,000 AdverseCorrect
- BRs 10,000 Favourable
- CRs 8,600 Adverse
- DRs 18,600 Favourable
Explanation
Standard quantity for actual output = 4,200 x 2 = 8,400 kg. Actual quantity used = 8,600 kg. Usage variance = (8,400 - 8,600) x Rs 50 = Rs 10,000 Adverse. Option B has the wrong sign; the price of Rs 49 is not used for usage variance.
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