Case Study

Wise Works Ltd. is in the business of handloom for the last 15 years and enjoys a good market share and reputation. Along with manufacturing and trading of bed sheets & curtains, it manufactures soft carpets which it sells in the domestic as well as international markets. The standard size of carpets measuring 3 metres wide and 30 metres long. Standard mixture fixed for a batch of 900 sq.m. of soft carpets is 2,000 kg of material X at Rs.1 per kg., 800 kg of material Y at Rs.1.50 per kg., 20 gallons of material Z at Rs. 30 per gallon. During a period, 1,505 standard sized soft carpets were produced from materials issued for 150 batches. The actual usage and cost of materials were 3,00,500 kg of material X at Rs.1.10 per kg, 1,19,600 kg of material Y at Rs.1.65 per kg and 3,100 gallons of material Z at Rs.29.50 per gallon.

Question 1:- The material price variance will be.
a) Rs 43,650 Adverse
b) Rs 40,890 Favourable
c) Rs 46,440 Adverse
d) Rs 47,990

Question 2:- The material mix variance is.
a) Rs.2,630 Adverse
b) Rs.2,698 Favourable
c) Rs.2,630 Favourable
d) Rs.2,698 Adverse

Question 3:- The standard cost of 150 batches of 900 sq.m. or 3 x 30 =90 sq.m. x 1,500 soft carpets is
a) Rs 4,67,800
b) Rs 6,00,000
c) Rs 5,80,000
d) Rs 5,70,000

Question 4:- The actual cost of production will be..
a) Rs 6,19,440
b) Rs 6,19,350
c) RS 6,19,340
d) Rs 5,70,000

Question 5:- The material yield variance is.
a) Rs 1630 favourable
b) Rs 1630 Adverse
c) Rs 2,630 favourable
d) Rs 3,630 Favourable