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Material Cost Variance Analysis

Material Cost Variance Analysis

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Published by: api-27014089 on Oct 17, 2008
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03/18/2014

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Lesson-26Material Cost Variance AnalysisLearning Objectives
To know how to calculate material cost variance
To know how to calculate material usage variance
To know how to calculate material price variance
Terminology for Material Variance Calculation
SQ =Standard Quantity
SR = Standard Rate
AQ = Actual Quantity
AP = Actual Price
RSQ = Resaved STD Quantity
MCV = Material Cost Variance
MUV = Material Usage Variance
MPV = Material Price Variance
MMV = Material Mix Variance
MYV = Material Yield Variance
Problem 1
The following information is obtained from X Co. Ltd.Product SQ SP AQ AP(Units) (Rs.) (Units) (Rs.)A 1050 2.00 1100 2.25B 1500 3.25 1400 3.50C 2100 3.50 2000 3.75Calculate the following:
Material cost variance
Material price variance
Material usage variance
Solution
1. MCV = (SQ x SR) (AQ x AR)A = (1050 x 2.00) (1100 x 2.25)= 2100 2475 = Rs. 375 (A)B = (1500 x 3.25) (1400 x 3.50)= 4875 4900 = 25 (A)
 
 2C = (2100 x 3.50) (2000 x 7.25)= 7350 7500 = 150 (A)--------------------550 A--------------------2. MPV = AQ (SP-AP)A = 1100(2.00 2.25) = 1100 x (0.25) = Rs. 275 (A)B = 1400(3.25 3.50) = 1400 x (-0.25) = Rs. 350 (A)C = 2000(3.50 3.75) = 2000 x (-0.25) = Rs. 500 (A)-----------------1125 A-----------------3. MUV = SP (SQ-AQ)A = 2 (1050 -1100) = 2 (-50) = Rs. 100 (A)B = 3.25 (1500 1400) = 3.25 (100) = Rs. 325 (F)C = 3.50 (2100 - 2000) = 3.50 (100) = Rs. 350 (F)---------------575 (F)---------------
Verification
MCV = MPV + MUVRs. 550 (A) = 1125(A) + 575 F550 (A) = 550 (A)
Problem 2
Product SQ SP Total AQ AP TotalA 10 2 20 5 3 15B 20 3 60 10 6 60C 20 6 120 15 5 75--- ----- --- -----Total 50 200 30 150--- ----- --- -----Find out (1) MCV (2) MPV (3) MMV (4) MUV
Sol.:
(1) MCV = (SQ x SR) (AQ x AR)A = (10 x 2) (5 x 3) = 5 FB = (20 x 3) (10 x 6) = Nil
 
 3 C = (20 x 6) (15 x 5) = 45 F------TOTAL = 50 F------(2) MPV = (SP AP) AQA = (2 - 3) 5 = 5 AB = (3 - 6) 10 = 30 AC = (6 - 5) 15 = 15 F--------TOTAL = 20 (A)(3) MMV = (RSQ AQ) SPIn this total std. mix and total actual mix is difference in proportion. Now you should calculatedrevised STD’s.MMV = (RSQ AQ) TAQRSQ = SQ---- x TAQTSQ10A = ---- x 30 = 65020B = ---- x 30 = 125020C = ---- x 30 = 1250 Now MMVA = (6-5) x 2 = 2 FB = (12-10) x 3 = 6 FC = (12-15) x 6 = 18 A--------10 (A)--------(4) MUV = (SQ AQ) SPA = (10 5) x 2 = 10 F

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