Material and Labour Variance Practicals with Solutions

Ques 1: The standard mix to produce one unit of product is as follows:

Material A 60 units @ Rs. 15 per unit = Rs. 9,00
Material B 80 units @ Rs. 20 per unit = Rs. 1,600
Material C 100 units @ Rs. 25 per unit = Rs. 2,500
Total 240 units Rs. 5,000
During the month of April, 10 units were actually produced and consumption was
as follows:
Material A 640 units @ Rs. 17.50 per unit = Rs. 11,200
Material B 950 units @ Rs. 18.00 per unit = Rs. 17,100
Material C 870 units @ Rs. 27.50 per unit =Rs. 23,925
Total 2,460 units Rs. 52,225
Calculate all material variances.
Solution:‐ Material Standard for 10 units Actual for 10 units

Qty Rate Amt. Rs. Qty Rate Amt. Rs.

A 600 15 9,000 640 17.50 11,200

B 800 20 16,000 950 18.00 17,100

C 1,000 25 25,000 870 27.50 23,925

Total 2,400 50,000 2,460 52,225

(1) Material Cost Variance = Standard cost –Actual cost

=Rs. 50,000 –Rs.52,225

MCV = Rs.2,225(A)

(2) Material Price Variance =(St. Price –Actual Price) x Actual

Qty

Material A = (15‐17.50) x 640 = Rs. 1,600 (A)

 Material B = (20 –18 ) x 950 = Rs. 1,900 (F)

Material C = (25 –27.50) x 870 = Rs. 2,175 (A)

MPV = Rs.1,875 (A)

(3) Material Usage Variance = (St. Qty –Actual Qty.) x St. Price

Material A = (600 –640) x 15 = Rs. 600(A)

Material B = (800‐950) x 20 = Rs.3,000 (A)

Material C = (1,000 –870 ) x 25 = Rs. 3,250 (F)

MUV = Rs.350 (A)

(4) Material Mix Variance = (Revised St. Qty –Actual Qty.) x St.
Price

Material A = (615* ‐640) x 15 = Rs.375 (A)

Material B =(820* ‐950) x 20 = Rs. 2,600 (A)

Material C = ( 1,025* ‐870) x 25 = Rs. 3,875 (F)

MMV = Rs. 900(F)

Revised Standard Quantity is 2460 x 600 = 615 Units

calculated as follows: Material A = 2400
Material B = 2460 x 800 = 820 Units
2400
Material C = 2460 x 1,000 = 1,025 Units
2400
(5) Material Yield Variance = (Actual yield –Standard yield) x St.
output price

= (10 ‐10.25 ) x 5000 = Rs. 1,250 (A)

Ques 2:
For making 10 kg. of yarn, the Quantity (kg.) Rate per kg. (Rs.)
standard material requirement is:
Material
White 8 6.00
Black 4 4.00
 In March, 1,000 kg. of yarn was Quantity (kg.) Rate per kg. (Rs.)
produced. The actual consumption
of materials is as under: Material
White 750 7.00
Black 500 5.00
Calculate: (1) MCV (2) MPV (3) MUV
Solution:
Particular Standard for 1000 kgs. Actual for 1000 kgs.
Quantity Rate Amount Quantity Rate Amount
A 800 6 4,800 750 7 5,250
B 400 4 1,600 500 5 2,500
Total 1,200 6,400 1,250 7,750

(1) MCV: SC ‐ AC
= 6,400 ‐ 7,750 = Rs. 1,350 (A)
(2) MPV: (SP ‐ AP) x AQ
A = (6 ‐ 7) x 750 = Rs. 750 (A)
B = (4 ‐5) x 500 = Rs. 500 (A)
= 1,250(A)
(3) MUV: (SQ ‐ AQ) x SP
A = (800 ‐ 750) x 6 = Rs. 300 (F)
B = (400 ‐ 500) x 4 = Rs. 400 (A)
= Rs. 100 (A)

Question 3: A manufacturing concern which has adopted standard costing furnishes following
information:
Standard Material for 70 kg of Finished Products 100 kg
Price of Materials ` 1 per Kg
Actual: Output 2,10,000 Kg
Materials used 2,80,000 Kg
 Cost of materials ` 2,52,000

Calculate (a) Material Usage Variance (b) Material Price Variance (c) Material Cost Variance.
Solution:
Data for Material Variance (2,10,000 kg)
Standard (Output 2,10,000 kg) Actual (Output 2,10,000 kg)
Qty. Rate Amount (`) Qty. Rate Amount (`)
3,00,000 kg 1 3,00,000 2,80,000 0.90 2,52,000
Statement of Variance
Sl. No. Particulars Basis Amount (`)
1. Material Usage Variance (Std.Qty. – A.Qty.) × S.P. 20,000 Favourable
(3,00,000 – 2,80,000) × 1
2. Material Price Variance (S.P. – A.P.) × A.S. 28,000 Favourable
(1 – 0.90) × 2,80,000
3. Material Cost Variance (Material Usage + Material Price 48,000 Favourable
Variance) i.e. SC–AC
Question 4: From the data given below, calculate the material price variance, the materials usage variance and
material cost variance.
Consumption per 100 Units of Product
Raw material Standard Actual
A 40 units @ ` 50 per unit 50 units @ ` 50 per unit
B 60 units @ ` 40 per unit 60 unit @ `45 per unit

Solution: Data for Material Variances

Standard Actual
Item Qty. Rate Amount Item Qty. Rate Amount
( `) ( `)
A 40 50 2,000 A 50 50 2,500
B 60 40 2,400 B 60 45 2,700
4,400 110 5,200
Statement of Variances
Sl. No. Particulars Basis Amount (`)
1. Material Price Variance (S.P. – A.P.) × A.Q.
A.→ (50 – 50) × 50 = 0
B.→ (40 – 45) × 60 = 300 Adverse 300 (Adverse)
2. Material Usage Variance (S.Q – A.Q.) × S.R
A.→ (40 – 50) × 50 = 500 500 (Adverse)
B.→ (60 – 60) × 40 = 0

Material Cost Variance = Material Price Variance + Material Usage Variance

= 300 (A) + 500 (A)
= ` 800 (A)
OR
Material Cost Variance = Standard Cost – Actual Cost
= 4,400 – 5,200
= ` 800 (Adverse)
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Question 5: From the following information, compute (a) Cost Variance (b) Price and (c) Usage
Variance.
Standard Actual
Quantity Unit Price Total (`) Quantity Unit Price Total (`)
Material A 10 2 20 5 3 15
Material B 20 3 60 10 6 60
Material C 20 6 120 15 5 75
Total 50 4 200 30 5 150
Solution: Data for Material Variance
Budgeted/Standard (1 FG) Actual (1 FG)
Amount Item Qty. Rate Amount
(`) (`)
A 10 2 20 A 5 3 15
B 20 3 60 B 10 6 60
C 20 6 120 C 15 5 75
200 30 150
Statement of Variance
Sl. No. Particulars Basis Amount (`)
1. Material Price Variance (S.R. – A.R.) × AQ
A.→ (2 – 3) × 5 = 5 (A)
B.→ (3 – 6) × 10 = 30 (A) 20 (A)
C.→ (6 – 5) × 15 = 15 (F)
2. Material Usage Variance (S.Q. – A.S.) × S.R.
A.→ (10 – 5) × 2 = 10 (F)
B.→ (20 – 10) × 3 = 30 (F) 70 (F)
C.→ (20 – 15) × 6 = 30 (F)
3. Material Cost Variance M.P.V. + M.U.V.
20 (A) + 70 (F) 50 (F)

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Question 6: Vinak Ltd. produces an article by blending two basic raw materials. It operates a standard costing
system and the following standards have been set for raw materials:
Material Standard Mix Standard Price per kg
A 40% `4.00
B 60%
` 3.00
The standard loss in processing is 15%. During April, 1980, the company produced 1,700 kg of finished output.
The position stock and purchases for the month of April, 1980 is as under:
Material Stock on 1.4.80 of kg Stock on 30.4.80 kg Purchased during April 1980
kg Cost (`)
A 35 5 800 3,400
B 40 50 1,200 3,000

Calculate the following Variances:

(i) Material Price Variance (ii) Material Usage Variance (iii) Material Yield Variance (iv) Material Mix Variance (v)
Total Material Cost Variance.
Solution:
Data for Material Variances
Material Budgeted Standard Standard Actual
for Actual
 Qty. Rate Amount Qty. Rate Amount Qty. Rate Amount
(`) (`) (`)
A 40 4 160 800 4 3,200 808 830 4.2394 3,518.75
B 60 3 180 1200 3 3,600 1,212 1,190 2.5168 2,995.00
100 340 2,000 6,800 2,020 6,513.75
Statement of Variance
Sl. Particulars Basis Amount ( `)
1. Material Price Variance (S.P. – A.P.) × A.Q.
A: (4 – 4.2394) × 830 = 199 (A)
B: (3 – 2.5168) × 1190 = 575 (F) 376 (F)
2. Material Usage Variance (S.Q. – A.Q.) × S.R.
A: (800 – 830) × 4 = 120 (A)
B: (1,200 – 4,190) × 3 = 30 (F) 90 (A)
3. Material Yield Variance (Standard Ratio for total standard quantity – Standard ratio for
total actual
quantity) × S.R.
A: (800 – 808) × 4 = 32 (A)
B: (1,200 – 1,212) × 3 = 36 (F) 68 (A)
4. Material Mix Variance (Standard Ratio for actual mix – Actual ratio for actual mix) ×
S.R.
A: (808 – 830) × 4 = 88 (A)
B: (1,212 – 1,190) × 3 = 66 (F) 22 (A)
5. Material Cost Variance Material price variance + Material Usage Variance 286 (F)
376 (F) + 90 (A)

Actual price per kg.

Material A:- ` 35 × 4 + 795 × 4.25
35 + 795
= `3518.85 = ` 4.239
830
Material B:- ` 40 × 3 + 1150 × 2.5
40 + 1150
= ` 2995 = ` 2.5168
1190
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Question 7: 1 kg of product ‘K’ requires two chemicals ‘A’ and ‘B’. The following were the details of product ‘K’
for the month of June 1987:
1. Standard mix Chemical ‘A’ 50% and Chemical ‘B’ 50%.
2. Standard price per kilogram of Chemical ‘A’ ` 12 and Chemical ‘B’ ` 15.
3. Actual input of Chemical ‘B’ 70 kilograms.
4. Actual price per kilogram of Chemical ‘A’ ` 15.
5. Standard normal loss 10% of total input.
6. Materials cost variance total ` 650 adverse.
7. Materials yield variance total `` 135 adverse.
Required: Calculate:
Material mix variance total
Material usage variance total
Material price variance total
Actual loss of actual input
Actual input of Chemical ‘A’
Actual price per kilogram of Chemical ‘B’
Solution:
Data for Material Variance
Standard Actual
Material Qty. Rate Amount Standard Qty. (kg) Rate Amount
(kg) (`/kg) Ratio for (`/kg)
(`) (`)
Actual Mix
A 50 12 600 55 40 15 600
B 50 15 750 55 70 20 1,400 (B.f.)

100 for 90G 1,350 110 110 (W.N. 2) 2,000

Statement of Requirement
1. Material Mix Variance= (Standard Ratio for Actual Mix – Actual Ratio for Actual Mix) ×
Standard Rate
= (55 – 40) × 12 + (55 – 70) × 15
= (15 × 12) + (–15 × 15)
= – 15 × 3 = – 45
= 45 (A)
2. Material Usage Variance= (S.Q. – A.Q.) × S.R.
 = (50 – 40) × 12 + (50 – 70) × 15
= 180 (A)
3. Material Price Variance= (S.R. – A.R.) × A.Q.
=(12 – 15 ) X 40 + (15 – 20) X 70
= 470 (A)
4. Actual Loss = (110 – 90) = ` 20/kg
5. Actual Input of Chemical A = 110 – 70 = ` 40/kg
6. Actual Price per Kg of Chemical B = ` 1,400/70 = ` 20/ kg
Working Notes:
. M.C.V = S.C. – A.C.
- 650 = 1,350 – A.C.
Actual Cost = 1,350 + 650 = 2,000
2. Material Yield Variance = (Total Standard Quantity – Total Actual Quantity) × Standard Weighted
Avg. Rate
-135 = (100 – T.A.Q) X 1,350/100
- 13,500
1,350 = 100 – T.A.Q.

- 10 = 100 – T.A.Q.
Total Actual Quality = 100 + 10
= 110 kg
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Question 8: The following information is provided.
Standard Wages: Grade X: 90 Labourers at ` 2 per hour
Grade Y: 60 Labourers at ` 3 per hour
Actual Wages: Grade X: 80 Labourers at ` 2.50 per hour
Grade Y: 70 Labourers at ` 2.00 per hour
Budgeted Hours 1,000; Actual Hours 900; Budgeted Gross Production 5,000 units;
Standard loss 20%; Actual Loss 900 units.
Required: Calculate the labour variances from the above information.

Solution: Data for Labour Variances

Budgeted (4000) Standard (4100) Actual (4100 units)
Material Lab. Hrs Rate Amount Lab. Hrs Rate Amount Lab. Hrs Rate Amount
`/hr (` (W.N. 2) (` ) (` )
X 90 × 1,000 = 2 1,80,000 92,250 2 1,84,500 80 × 900 = 2.50 1,80,000
Y 90,000 72,000 2.00
60 × 1,000 = 3 1,80,000 61,500 3 1,84,500 70 × 900 = 1,26,000
60,000 63,000
1,50,000 3,60,00 1,53,750 3,69,000 1,35,000 3,06,000
Statement of Variance
Sl. No. Particulars Basis Amount (`)
 1. Labour rate variances (S.R. – A.R.) × Actual payment hours
Grade X.→ (2 – 2.50) × 72,000 = 36,000 (A)
Grade Y.→ (3 – 2) × 63,000 = 63,000 (F) 27,000 (F)
2. Labour efficiency variance (Standard hour – Actual work hrs.) × Standard
rate
Grade X.→ (92,250 – 72,000) × 2 = 40,500 (F)
Grade Y.→ (61,500 – 63,000) × 3 = 4500 (F) 36,000 (Fav.)

Working Notes:
1. Calculation of Net Production
Budgeted (Units) Actual (Units)
Gross Production 5,000 5,000
(–) Loss (Normal) 1,000 9,00
(20% of 5,000)
Net Production 4,000 4,100

We should assume that Budgeted gross & actual gross production will be same.
2. Calculation of Revised Budgeted Hrs.
X: 4,000 F.G. = 90,000 Labour Hrs.
1 F.G 90,000 LAbour Hrs.
4,000
4100 F.G. = 90,000
4,000 X 4,100 Labour Hr.
= 92,250 Labour Hrs.
Y: 4,000 F.G. = 60,000 Labour Hrs.
1 F.G 60,000 LAbour Hrs.
4,000
4100 F.G = 60,000 X 4,100 Labour HRs.
4,000
= 61,500 Labour Hrs
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Question 9: A gang of workers usually consists of 10 men, 5 women and 5 boys in a factory. They are paid at
standard hourly rates of ` 1, ` 2 and ` 3, respectively. In a normal working week of 40 hours the gang is expected
to produce 1,000 units of output.
In a certain week, the gang consisted of 13 men, 4 women and 3 boys. Actual wages were paid at the rates of ` 3,
` 4 and ` 5, respectively. Two hours were lost due to abnormal idle time and 960 units of output were produced.
Calculate various labour variances.
Solution: Data for Labour Variance
Budgeted (1000) Revised Budgeted (960) Actual (960) Actual Working
Hours
Lab Hr. Rate Amount Lab Hr. Rate Amount Lab Hr. Rate Amount
(` ) (` ) (` )
Men 400 1 400 384 1 384 520 3 1,560 494
Women 200 2 400 192 2 384 160 4 640 152
600 576 600
 Boys 200 3 1,400 192 3 1,344 120 5 2,800 114

Statement of Labour Variance

Sl. No. Particulars Basis Amount (`)
1. Labour Cost Variance (S.C. – A.C.)
1344 – 2800 1,456 (A)
2. Labour Rate Variance (S.R. – A.R.) × Actual Payment Hrs
Men: (1 – 3) × 520 = 1040 (A)
Women: (2 – 4) × 160 = 320 (A) 1,600 (A)
Boys: (5 – 43) × 120 = 240 (A)

3. Labour Efficiency Variance (Standard Hrs. – Actual Working Hours) × S.R.

Men: (384 – 494) × 1 = 110 (A)
Women: (192 – 152) × 2 = 80 (F) 204 (F)
Boys: (192 – 114) × 3 = 234 (F)

4. Labour Idle Time Variance (Idle Time × S.R.)

Men: 13 × 2 × 1 = 26 (A) 60 (A)
Women: 4 × 2 × 2 = 16 (A)
Boys: 3 × 2 × 3 = 18 (A)

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Question 10: The details regarding the composition and the weekly wage rates of labour force engaged on a
job scheduled to be completed in 30 weeks are as follows:
Standard Actual
Category or No. of Labourers Weekly wage rate No. of Weekly wage rate
Workers per Labourer (`) Labourers per Labourer (`)

Skilled 75 60 70 70
Semi-skilled 45 40 30 50
Unskilled 60 30 80 20
The work is actually completed in 32 weeks.
Required: Calculate the various labour variances.

Solution: Data for Labour Variance

Category Budget/Revised Actual
Category Time Rate Amount Standard Ratio for Qty. Rate Amount
(weeks) (`/week) (` ) Actual Mix (weeks) (` )
Skilled 2,250 60 1,35,000 2,250 2,240 70 1,56,800
Semi-skilled 1,350 40 54,000 _ 960 50 48,000
Unskilled 1,800 30 54,000 2,400 (5400 × 5,760 2,560 20 51,200
1,350 5,760
_
1,440 ( 5400 × 5,760
1,800
_
1,920 (5400 × 5,760
5760
5400 2,43,000 5760 5,760 2,56,000
 Statement of Labour Variances
Sl. Particulars Basis Amount (`)
No.
1. Labour cost Standard Cost – Actual Cost 13,000 (A)
variance 2,43,000 – 2,56,000 = 13,000 (Adv.)

2. Labour rate (S.R. – A.R.) × Actual Payment Hrs

variance Skilled: (60 – 70) × 2240 = 22400 (A)
Semi-skilled: (40 – 50) × 960 = 9600 (A) 6,400 (A)
Unskilled: (30 – = 25600 (F)

3. Labour (S.Q. – A.Q.) × S.R

efficiency Skilled: (2,250 – 2,240) × 60 = 600 (F)
variance Semi-skilled: (1,350 – 960) × 40 = 15,600 (F) 6,600 (A)
Unskilled: (1,800 – 2,560) × = 22,500 (A)

4. Labour mix (S. Ratio for Actual Mix – Actual Ratio for Actual Mix) × S.R.
variance Skilled: (2,400 – 2,240) × 60 = 9,600 (F)
Semi-Skilled: (1,440 – 960) × 40 = 19,200 (F)
Unskilled: (1,920 – 2,560) × 30 = 19,200 (A) 9,600 (F)

5. Labour (Standard Ratio for Standard Quantity – Standard Ratio for Actual Quantity) × S.R.
yield Skilled: (2,250 – 2,400) × 60 = 9000(A)
variance Semi-Skilled: (1350 – 1440) × 40 = 3600(A) 16,200 (A)
Unskilled: (1800 – 1920) × 30 = 3600(A)

Ques 11:

Standard labour hours and rate Rate per Hour Total (Rs.)
for production of one unit of
Article P is given below: Per Unit
Hour

Skilled worker 5 1.50 7.50

Unskilled worker 8 0.50 4.00

Semi‐ skilled worker 4 0.75 3.00

Actual Data Rate per Hour Total (Rs.)

Articles produced 1,000 units

Skilled worker 4,500 hour 2.00 9,000

Unskilled worker 10,000 0.45 4,500

hour

Semi‐ skilled worker 4,200 0.75 3,150

hour
Calculate Labour cost variance.

Solution:
Labour cost variance = (SH for actual production x SR) ‐‐‐ (AH x AR)
Skilled worker = (5,000 x 1.50) ‐‐‐ (4,500 x 2 )
= 7,500 – 9,000
= Rs. 1,500 (Adverse)
Unskilled worker = (8,000 x 0.50) ‐‐‐ (10,000 x 0.45)
= 4,000 ‐‐‐ 4,500
= Rs. 500 (Adverse)
Semi‐ skilled worker = (4,000 x 0.75) ‐‐‐ (4,200 x 0.75)
= 3,000 ‐‐‐ 3,150
= Rs. 150 (Adverse)
Total Labour cost variance = Rs. 2,150(Adverse)

Ques 12:
India Ltd. Manufactures a Hours Rate (Rs.) Amount (Rs.)
particular product, the standard
direct labour cost of which is Rs.
120 per unit whose
manufacture involves the
following: Type of workers
A 30 2 60
B 20 3 60
50 120

During a period, 100 units of the product were produced, the actual labour cost of
which was as follows:

Type of workers Hours Rate (Rs.) Amount (Rs.)

A 3,200 1.50 4,800
B 1,900 4.00 7,600
5,100 12,400

Solution:
 Type of Worker Standard for 100 units Actual for 100 units
Hours Rate Amount Hours Rate Amount
A 3,000 2 6,000 3,200 1.50 4,800
B 2,000 3 6,000 1,900 4.00 7,600
Total 5,000 12,000 5,100 12,400

(1) LCV: SC ‐AC

LCV = 12,000 ‐ 12,400 = Rs. 400 (A)

(2) LRV: (SR ‐ AR) x AH
A = (2 ‐ 1.50) x 3,200 = Rs. 1,600 (F)
B = (3 ‐ 4) x 1,900 = Rs. 1,900 (A)
= Rs. 300 (A)
(3) LEV: (SH ‐ AH) x SR
A = (3,000 ‐ 3,200) x 2 = Rs. 400 (A)
B = (2,000 ‐ 1,900) x 3 = Rs. 300 (F)
= Rs. 100 (A)
(4) LMV: (RSH ‐ AH) x SR
A = (3,060 ‐ 3,200) x 2 = Rs. 280 (A)
B = (2,040 ‐ 1,900) x 3 = Rs. 420 (F)
= Rs. 140 (F)
Working: Revised standard Hours:
RSH = St. hours of the type x Total actual hours / Total St. hours
A = 3,000 x 5,100 / 5,000 = 3,060 hrs.
B = 2,000 x 5,100 / 5,000 = 2,040 hrs.