CA Intermediate · Cost and Management Accounting · Standard Costing
Which one of the following is the correct formula for the Material Usage (Quantity) Variance under standard costing?
Material usage variance equals standard quantity for actual output minus actual quantity, multiplied by the standard price. Valuing at standard price isolates the efficiency of material use from price changes, which are captured separately in the material price variance.
- A(Standard Quantity for Actual Output − Actual Quantity) × Standard PriceCorrect
- B(Standard Price − Actual Price) × Actual Quantity
- C(Standard Quantity for Actual Output − Actual Quantity) × Actual Price
- D(Standard Cost of Standard Mix − Standard Cost of Actual Mix)
Explanation
Material usage variance measures the effect of using more or less material than allowed for actual output, valued at the standard price. Option 3 uses the actual price, which mixes in the price effect. Option 2 is the price variance. Option 4 is the mix variance.
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