STANDARD COSTING WITH SOLUTIONS

Question 1: Calculate Material Price Variance and Material Usage Variance:

Standard (1 FG) Actual (1 FG)
Kg Rate Amount (`) Kg Rate Amount (`
18,000 10 1,80,000 20,000 12 2,40,000
5,000 20 1,00,000

After analysing, it was found that out of 25,000 unit, 5,000 units were purchased as an emergency
order at higher rate @ ` 20.
Solution:
Material Price Variance = (S.P. A.P.) A.S.
= (10 12) 20,000 + (10 12) 5,000
= ` 50,000 (A)
Material Usage Variance = Excess price variance due to emergency order + (S.Q. A.Q.) S.P.
= (12 20) 5,000 + (18,000 25,000) 10
= ` 1,10,000 (A)
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Question 2: 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. SCAC
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Question 3: 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
60 units @ ` 40 per
B 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 = 300 300 (Adverse)
2. Material Usage Variance Adverse
(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 4: 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
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