LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Standard costing doubt

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)

16 December 2012

Hello frns, I need little help regarding std costing -

calculate Material price variance n usage variance

Std qty :- 18,000

SR - 10

on analysis it was found that out of 25,000 kgs , 5,000kgs were purchased in emergancy order @ 20 kg

Actual qty Actual price

20,000 12/kg

5000 20/kg

I am unable to derive the answer provided in the book. the question is from Sanjay Aggarwal's book and it's 1st question.

will be waiting for replies with logics

Regards

Renu

Reply
Follow
Share

14 Replies

sidhant saha (prop) (1394 Points)
Replied 16 December 2012

material price variance-this is the difference in cost that results from price being different to standard. it is therefore the difference in price multiplied by actual usage.the formula is price difference *actual quantity. or (standard price-actual price)*actual quantity. or standard price * actual quantity-actual price *actual quantity.or standard cost of actual quantity -actual cost. therefore mpv= 10-12*20000=40000(A) material usage variance-the material usage variance is the difference between actual usage and expected usage (i.e.what should have been used to produce the actual output ) multiplied by the standard price .the formula is usage difference * standard price or (standard usage-actual usage)*standard price or( standard usage*standard price) - ( actual usage*standard price ) or standard cost of standard quantity -standard cost of actual quantity.therefore(18000*10)-(20000*10 )=180000-20000=20000(A)

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

PRICE VARIANCE = (SP-AP)AQ OR SP*AQ -AP*AQ

= 10*18000 - {(12*20000)+(20*5000)}

= 180000-(240000+100000)

= 180000-340000 = 160000 (A)

USAGE VARIANCE = (SQ-AQ)SP

= (18000-25000)10

= 7000*10 =70000 (A)

COST VARIANCE = 160000+70000=230000 (A)

IF DIFFERENT PLEASE FEEL FREE TO ASK.................

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 16 December 2012

@ sidhant ...

I didn't understand why you haven't taken 5000 kg in consideration as well ....

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 16 December 2012

@ Rajnikant Sir

You hav already calculated the material cost variance in price variance.

the actual answers are :-

Material price variance :- 110,000 (A)

Usage variance :- 50,000 (A)

MCV is 160000 (A) which is correct but I am unable to cal price n usage variance .

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

DEAR RENU,

IS THERE ANY DIFFERENCE IN OUTPUT CAN U GIVE ME MORE DETAILS...............

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 16 December 2012

@ rajnikant Sir

I have pasted the whole question. There are no further details in the question.

I was thinking that there should be some different treatment for emergancy purchase, thats y my answer is not matching with the book.

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

YES U R RIGHT I ASSUME SAME I'LL COME TO U SOON..........

1 Like

Deepak Gupta (CA Student) (15922 Points)
Replied 16 December 2012

Solution:

Material Price Variance = (S.P. – A.P.) × A.S.

= (10 – 12)×20,000 + (10 – 12)×5,000

=50,000 Adverse

Material Usage Variance = Excess price variance + (S.Q. – A.Q.)×S.P.

due to emergency order

= (12 – 20)×5,000 + (18,000 – 25,000)×10

=1,10,000
.
Note: Solution copy pasted from

(https://www.scribd.com/doc/109714785/38-Standard-Costing)

3 Like

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

YES I AGREE WITH DEEPAK....

Deepak Dargad (Chartered Accountant....) (9787 Points)
Replied 16 December 2012

Originally posted by : \|)eep @ k Gupt/\
	Solution: Material Price Variance = (S.P. – A.P.) × A.S. = (10 – 12)×20,000 + (10 – 12)×5,000 =50,000 Adverse Material Usage Variance = Excess price variance + (S.Q. – A.Q.)×S.P. due to emergency order = (12 – 20)×5,000 + (18,000 – 25,000)×10 =1,10,000 . Note: Solution copy pasted from (https://www.scribd.com/doc/109714785/38-Standard-Costing)