Material Cost variance (MCV) = (SQ x SP) – (AQ x AP)

Material Price Variance (MPV)= (SP-AP) x AQ

Material Usage Variance (MUV) = (SQ-AQ) x SP
SET 1
1.
SQ for actual output = 10; SP = 4; AQ = 12; AP = 4.50
Material Cost variance (MCV) = (SQ x SP) – (AQ x AP)
= (10*4) – (12*4.50)
= 40 – 54 = 14 (A)
A denotes Adverse or Unfavourable
Material Price Variance (MPV)= (SP-AP) x AQ
= (4-4.50) * 12 = 6 (A)
Material Usage Variance (MUV) = (SQ-AQ) x SP
= (10-12) * 4 = 8 (A)
Verification of Answer can be done MCV = MPV + MUV
14(A) = 6(A) + 8(A)
2.
SQ for actual output = 16; SP = 1; AQ = 20; AP = 1.50
Material Cost variance (MCV) = (SQ x SP) – (AQ x AP)
= (16*1) – (20*1.50)
= 16 – 30 = 14 (A)
A denotes Adverse or Unfavourable
Material Price Variance (MPV)= (SP-AP) x AQ
= (1-1.50) * 20 = 10 (A)
Material Usage Variance (MUV) = (SQ-AQ) x SP
= (16-20) * 1 = 4 (A)
Verification of Answer can be done MCV = MPV + MUV
14(A) = 10(A) + 4(A)
Q3.
In this question, SQ required to produce 1 unit of product is given. Ie 5
Actual output produced = 400 units
Therefore SQ for actual output = 5*400 = 2000
SP = 5; AQ = 2200; AP = 4.80
Material Cost variance (MCV) = (SQ x SP) – (AQ x AP)
= (2000*5) – (2200*4.80)
= 10000 – 10560 = 560 (A)
A denotes Adverse or Unfavourable
Material Price Variance (MPV)= (SP-AP) x AQ
= (5-4.80) * 2200 = 440 (F)
Material Usage Variance (MUV) = (SQ-AQ) x SP
= (2000-2200) * 5 = 1000 (A)
Verification of Answer can be done MCV = MPV + MUV
560(A) = 440(F) + 1000(A)
-560 = 440-1000
Q4.
SQ of material required for 1 table = 4 sq.ft
Actual output = 1000 tables
SQ of material required for Actual output = 4*1000 = 4000
SP = 5; AQ= 4300; AP = 5.50
Material Cost variance (MCV) = (SQ x SP) – (AQ x AP)
= (4000*5) – (4300*5.50)
= 20000 – 23650 = 3650 (A)
A denotes Adverse or Unfavourable
Material Price Variance (MPV)= (SP-AP) x AQ
= (5-5.50) * 4300 = 2150 (A)
Material Usage Variance (MUV) = (SQ-AQ) x SP
= (4000-4300) * 5 = 1500 (A)
Verification of Answer can be done MCV = MPV + MUV
3650(A) = 2150(A) + 1500(A)
Q5.
In this question, Std output, actual output, actual material used is given. We need Std qty of
material for actual output.
For 1 unit of output, 3 kg of Std material is required.
Actual output = 80 units
Therefore, Std qty of material for actual output = 80 * 3 = 240
AQ of material used = 250; SP = 6; AP =5.50
Material Cost variance (MCV) = (SQ x SP) – (AQ x AP)
= (240*6) – (250*5.50) = 1440 – 1375 = 65 (F)
F denotes Favourable; A denotes Adverse of Unfavourable
Material Price Variance (MPV)= (SP-AP) x AQ
= (6-5.50) * 250 = 125 (F)
Material Usage Variance (MUV) = (SQ-AQ) x SP
= (240-250) * 6 = 60 (A)
Verification of Answer can be done MCV = MPV + MUV
65(F) =125(F) + 60(A)
I.e. 65 = 125-60
 SET 2
Q1. Std material for 70 kg of finished product = 100 kg material
SP = Rs.1; Actual output = 2,10,000 kg;
AQ = 2,80,000; Cost of material = 2,52,000
Then, how much kg of material required for 2,10,000 kg??
2,10,000 *100/70 = 3,00,000
Therefore SQ = 3,00,000; SP = Rs.1
Actual Quantity (AQ) = 2,80,000
Cost = Price * Qty; 2,52,000 = Price * 2,80,000
Price = 2,52,000/2,80,000 = 0.90
SQ =3,00,000; SP =Rs.1; AQ = 2,80,000; AP= Rs.0.90

● Material Cost variance (MCV) = (SQ x SP) – (AQ x AP)

= (3,00,000*1)-(2,80,000*0.90)
= 3,00,000-2,52,000 = 48000 (F)

● Material Price Variance (MPV)= (SP-AP) x AQ

= (1-0.9)*2,80,000 = 28,000 (F)

● Material Usage Variance (MUV) = (SQ-AQ) x SP

= (3,00,000-2,80,000)*1 = 20,000 (F)

● Verification

MCV = MPV+MUV; 48000 (F) = 28000 (F)+ 20,000 (F)

Q.3

Material Standard (1000 units) Actual (1000 units)

Qty Rate Amount Qty Rate Amount
White 800 6 4800 750 7 5250
Black 400 4 1600 500 5 2500
1200 6400 1250 7750
For producing 10 kg of White, 8 unit of material is required.
Hence, for producing 1000 kg, the unit required will be 8 *100 = 800
For producing 10 kg of Black, 4 unit of material is required.
Hence, for producing 1000 kg, the unit required will be 4 *100 = 400

White = SQ = 800; SP = Rs.6; AQ = 750; AP = Rs.7

Black = SQ = 400; Sp= Rs.4; AQ = Rs.500; AP = Rs.5

● MCV = (SQ x SP) – (AQ x AP)

White = (800*6)-(750*7) = 4800 – 5250 = 450 (A)

Black = (400*4)-(500*5) = 1600-2500 = 900 (A)
Total MCV = 450 (A)+900(A) = 1350 (A)

● Material Price Variance (MPV)= (SP-AP) x AQ

White = (6-7)*750 = 750 (A)
Black = (4-5)*500 = 500 (A)
Total MPV = 750 (A)+500(A) = 1250 (A)

● Material Usage Variance (MUV) = (SQ-AQ) x SP

White = (800-750)*6 = 300 (F)
Black = (400-500)*4 = 400 (A)
Total MUV = 300 (F)+400(A) = 300-400= 100 (A)

Verification = MCV= MPV+MUV

1350 (A) = 1250 (A)+ 100 (A)

Q.4
Standard quantity of material (SQ) = (90 x 40) = 3600 units
Standard price per unit = Rs. 3
Actual price per unit = 14000/4000 = Rs. 3.50
(i) Material Cost Variance = (SQ x SP) – (AQ. x AP) = 10,800 – 14,000 = Rs. 3,200 (A)
(ii) Material Price Variance = (SP – AP) AQ = 4,000 (3.00 – 3.50)
= 4,000 (–0.50) = Rs. 2,000 (A)
(iii) Material Usage Variance= (SQ – AQ) SP = 3 (3,600 – 4,000)
= 3 (–400) = Rs. 1,200 (A)
Verification: MCV = MPV + MUV
– 3,200 = – 2,000 – 1,200
– 3,200 = – 3,200
Q5. Solution
Material Standard Actual
Qty Rate Amount Qty Rate Amount
A 1050 2 2100 1100 2.25 2475
B 1500 3.25 4875 1400 3.5 4900
C 2100 3.5 7350 2000 3.75 7500
4650 14325 4500 14875
1. Material Cost Variance = (SQ x SP) – (AQ. x AP)
Material A = (1,050 x 2) – (1,100 x 2.25) = 2,100–2,475 = Rs. 375 (A)
Material B = (1,500 x 3.25) – (1,400 x 3.50) = 4,875–4,900= Rs. 25 (A)
Material C = (2,100 x 3.50) – (2000 x 3.75) = 7,350–7,500 = Rs. 150 (A)
Material Cost Variance = Rs. 550 (A)
2. Material Price Variance = (SP – AP) AQ
Material A= 1,100 (2.00 – 2.25) = 1,100 (–0.25) = Rs. 275 (A)
Material B= 1,400 (3.25 – 3.50) = 1,400 (–0.25) = Rs. 350 (A)
Material C= 2,000 (3.50 – 3.75) =2,000 (–0.25) = Rs. 500 (A)
Material Price Variance = Rs. 1,125 (A)

3. Material Usage Variance = (SQ – AQ) SP

Material A = 2 (1.050 – 1,100) = 2 (–50) = Rs. 100 (A)
Material B = 3.25 (1,500–1,400) = 3.25 (100) = Rs. 325 (F)

Material C = 3.50 (2,100 – 2,000) = 3.50 (100) = Rs. 350 (F)

Material Usage Variance = Rs. 575 (F)
Verification: MCV = MPV + MUV

– Rs.550= – Rs. 1125 + Rs. 575

– Rs. 550 = – Rs. 550
 Material Usage Variance (MUV) is having two sub variances
1. Material Mix Variance (MMV)
2. Material Revised Usage Variance ( or Material Yield Variance)
Material Mix Variance (MMV)

● It arises when more than one raw material is used for producing a finished product.
Variance may occur due to non-availability of required material.
MMV = (RSQ-AQ) * SP
RSQ = Revised Std Quantity = (TAQ/TSQ)* Std.Qty of each material
TAQ = Total Actual Qty; TSQ = Total Std. Qty
Material Revised Usage Variance

● Once the revision in material mix is taken place, we have to compute the usage
variance again. This is known as Material Revised Usage Variance or Material Sub
usage variance.
MRUV = (SQ-RSQ) * SP
Material Yield Variance

● It is usually happened in case of industries where production is completed in different

processes. So in each process, there will be normal loss.
● MYV is the difference between Actual Yield (output) and the Std yield. The
difference will be due to abnormal gain or abnormal loss
MYV = (AY-SY)* SR
AY = Actual Yield; SY = Std. Yield; SR = Std Rate
SR = Std. cost of material/ Net std. output
Net std output = Std output- loss if any
Q2.
Materia Standard (10 units) Actual (10 units)
l
Qty Rate Amount Qty Rate Amount
A 60*10 =600 15 9000 640 17.50 11,200
B 80*10 = 800 20 16000 950 18 17,100
C 100*10= 1000 25 25000 870 27.50 23,925
2400 50,000 2460 52,225

A : SQ= 600; SP= 15; AQ= 640; AP= 17.50

B: SQ= 800; SP= 20; AQ= 950; AP= 18
C: SQ= 1000; SP= 25; AQ= 870; AP= 27.50
a. Material Cost variance (MCV) = (SQ x SP) – (AQ x AP) = Ans: 2225 (A)
b. Material Price Variance (MPV)= (SP-AP) x AQ = Ans: 1875 (A)
c. Material Usage Variance (MUV) = (SQ-AQ) x SP = Ans: 350 (A)
d. Material Mix Variance (MMV) = (RSQ-AQ) x SP
Revised Std Qty (RSQ)= (TAQ/TSQ)* Std.Qty of each material
Total Actual Qty (TAQ) = 2460; Total Std Qty (TSQ) = 2400
RSQ of Material A = (2460/2400)* 600 = 615
RSQ of Material B = (2460/2400)* 800 = 820
RSQ of Material C = (2460/2400)* 1000 = 1025
MMV of Material A = (RSQ-AQ) x SP = (615 - 640)*15 = 375(A)
MMV of Material B = (RSQ-AQ) x SP = (820 - 950)*20 = 2600 (A)
MMV of Material C = (RSQ-AQ) x SP = ( 1025- 870)*25 = 3875 (F)
Total MMV = 375(A)+ 2600 (A)+ 3875 (F) = 900 (F)
e. Material Revised Usage Variance (MRUV) = (SQ-RSQ) * SP
MRUV of Material A = (600-615)*15 = 225 (A)
MRUV of Material B = (800-820)*20 = 400 (A)
MRUV of Material C = (1000-1025)*25 = 625 (A)
Total MRUV = 225 (A)+ 400 (A)+ 625 (A) = 1250 (A)
Verification:
MUV = MMV+MRUV (or MYV as the case); 350 (A) = 900(F)+ 1250 (A)
MCV = MPV+ MMV+ MRUV; 2225 (A) = 1875 (A)+ 900(F)+ 1250 (A)
-2225 = -1875+900-1250
Q6.
Solution:
In this question the standards will be revised. Revised standards will be :
Material A = 50 – 5 (50 x 10/100) = 45
Material B = 100 + 5 (100 x 5/100) = 105
Material Mix Variance = Standard Unit Price (Revised Standard Quantity – AQ)
Material A = 2 (45 – 60) = 2 (– 15) = Rs. 30 (A)
Material B = 1.20 (105 – 90) = 1.20(15) = Rs. 18 (F)
Material Mix Variance= Rs. 12 (A)
Q7.

Material Standard Actual

Qty Rate Amount Qty Rate Amount
A 80 8 640 90 7.5 675
B 70 3 210 80 4 320
150 850 170 995

1. Material Cost Variance = (SQ x SP) – (AQ. x AP)

Material A = 640-675 = 35 (A)
Material B = 210-320 = 110 (A)
Total MCV = 145 (A)
2. Material Price Variance = (SP – AP) AQ
Material A = (8-7.5)90 = 45 (F)
Material B = (3-4)80 = 80 (A)
Total MPV = 35 (A)
3. Material Usage Variance = (SQ – AQ) SP
Material A = (80-90)8 = 80 (A)
Material B = (70-80)3 = 30 (A)
Total MUV = 110 (A)

4. MMV = (RSQ-AQ)SP
RSQ of A =TAQ/TSQ*SQ = 170/150*80 = 90.67
RSQ of B = 170/150*70 = 79.33
MMV of A = (90.67-90)8 = 5.36 (F)
MMV of B = (79.33-80)3 = 2.01 (A)
Total MMV = 3.35 (F)
5. MSUV = (SQ-RSQ) SP
A = (80-90.67)8 = 85.36 (A)
B = (70-79.33)3 = 27.99 (A)
Total MSUV = 113.35(A)