CA Intermediate · Cost and Management Accounting · Standard Costing
Vihaan Textiles uses standard costing. Standard material cost per unit of output is 4 kg at Rs 50 per kg. In a month, 1,000 units were produced, 4,100 kg were purchased and used, and the total actual material cost was Rs 2,09,100. What is the material price variance?
The material price variance is Rs 4,100 Adverse. The actual price is Rs 51 per kg (2,09,100 divided by 4,100 kg) against a standard of Rs 50, and the Re 1 excess is applied to the actual quantity of 4,100 kg.
- ARs 4,100 Favourable
- BRs 4,100 AdverseCorrect
- CRs 5,000 Adverse
- DRs 5,000 Favourable
Explanation
Actual price per kg = 2,09,100/4,100 = Rs 51. Material price variance = (SP - AP) x AQ = (50 - 51) x 4,100 = Rs 4,100 Adverse. Rs 5,000 would come from using standard quantity (4,000 kg) instead of actual quantity, which is the wrong base.
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