BBA-DEC.

2012
BBA-DEC.2009
A factory works on the standard cost system. The standard
estimate materials for manufacture at 100 units of a
commodity is 400 kg at Rs. 2.5 per kg. When 200 units
of the commodity are manufactured, it is found that 820
kg of materials are consumed at Rs. 2.6 per kg. Calculate
the material cost variance, material price variance and
material quantity variance.
(Hint: Standard output=100units; Actual output=200 units
SP =Rs.2.5 per kg , AP= Rs. 2.6 per kg , AQ= 820 kg
SQ for Actual output = SQ X ACTUAL OUTPUT
STANDARD OUTPUT
SQ for Actual output= 400 x 200 = 800 kg
100
(Ans. MCV = Rs. 132(A), MPV= Rs. 82(A), MQV or MUV=Rs. Rs.50(A)
Verification: MCV = MPV + MUV
132 (A) = 82 (A)+ 50 (A)
 Utility/application of Variance analysis
 “Variances should be interpreted with
consideration of the care with which
estimates or standards have been set, and of
the tightness of the standard.” Explain the
statement with reference to standards for
material costs. (Dec. 2014)