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Illustrations 1. Material Cost Variances M 12 1. Material Cost Variances The standard set for a chemical mixture of a Company is as under: Material Standard Mix (%) A 80 B 20 Standard Price 1kg 50 100 Standard Yield in Production is 75%. The actual quantity produced was 1,800 kg of output from the following: Material Standard Mix (%) 1,400 B 600 Standard Price / kg 60 90 Calculate the Total Material Price, Mix and Yield Variances, indicating whether they are Favourable (F) or Adverse (A or U). Solution: Working Notes: 1. Computation of Standard Quantity (SQ) 2. Computation of Revised Actual Quantity (RAQ) Yield = 75%. Total AQ = 1,400 + 600 = 2,000 kg RM 1,800 kg Since Actual Output is 1,800 kg, SQ = = 2,400 kg B 75% Material 20% Standard Mix 80% RAQ 1,600 kg Material A B Standard Mix 80% 20% Std Quantity 1,920 kg 480 kg 400 kg Particulars Material A Material B Col.(1): SQ * SP 1,920 x 50 = 96,000 480 x 100 = 48,000 (WN 1) 1,44,000 3. Variance Computation Chart Col.(2): RAQ * SP Col.(3): AQ SP 1,600 x 50 = 80,000 1,400 x 50 = 70,000 400 x 100 = 40,000 600 x 100 = 60,000 (WN 2) 1,20,000 1,30,000 Col.(4): AQ AP 1,400 x 360 = 84,000 600 x 90 = 54,000 1,38,000 3 Total + + Material Yield Variance = Col.1 (-) Col.2 96,000 - 80,000 = 16,000 F 48,000 - 40,000 = 8,000 F 24,000 F For Mati.A For Mati.B Total Material Price Variance = Col.3 - Col.4 70,000 - 84,000 = 14,000 A 60,000 - 54,000 = 6,000 F 8,000 A Material Mix Variance = Col.2 (Col.3 80,000 - 70,000 = 10,000 F 40,000 - 60,000 = 20,000 A 10,000 A + Material Usage Variance = Col.1 (-) Col.3 Mati.A 96,000 - 70,000 = 26,000 F Mat.B 48,000 - 60,000 = 12,000 A 14,000 F Material Price Variance b/fd as above 14,000 A 6.000 F 8,000 A Total Material Cost Variance = Col.1 (-) Col.4 Matl. A 96,000 - 84,000 = 12,000 F Matl.B 48,000 - 54,000 = 6,000 A 6,000 F Note: Material-wise Breakup of Variances are shown in the above Table itself. 16.22 Standard Costing and Varia! M 15 2 Material Cost Variances The Standard Cost of certain chemical mixture is as under: 40% of Material A @ 30 per kg, 60% of Material B @