Question

Q1

Maria manufacturers gives the following details of standard cost relating to one unit of a product.

Quantity of raw material required              20 Kg.

Rate of raw material                                     OMR 8 per Kg

Actual production of QPz:

Production during the month          2000 Kg.

Quantity of material used                 40,000 Kg.

Raw material purchased                  45000 kg @ 9 per kg.

Required:

1. Compute three variances relating to material and verify the answer.
2. If there is 20% decrease in standard usage of raw material , what impact it will create in material cost variance.   

Q2

Material price variance        -           OMR 2500 (A)

Standard rate of material     -           OMR    10

Actual rate of raw material -           OMR 15

Standard quantity of raw material for actual production            - 6,600 Kg

Actual cost of raw material used in production – OMR 100,500

Calculate material cost variance

Q3.

How will you explain in your own words material mix variance and material yield variance.

Answer 1

Q-3

MATERIAL MIX VARIANCE

material mix variance is an extension of the material usage variance, the variance is based on the standard price rather than actual price since the difference between actual and standard material price is accounted for separately in the material price variance.

Direct Material Mix Variance is the measure of difference between the cost of standard proportion of materials and the actual proportion of materials consumed in the production process during a period.

Formula

Direct Material Price Variance:

=	Actual Quantity x Standard Price	-	Standard Mix Quantity x Standard Price
=	Standard Cost of Actual Mix	-	Standard Cost of Standard Mix
=	(Actual Mix Quantity - Standard Mix Quantity)	x	Standard Price

MATERIAL YIELD VARIANCE

Direct Material Yield Variance is a measure of cost differential between output that should have been produced for the given level of input and the level of output actually achieved during a period.

Formula

Direct Material Price Variance:

=

(Actual Yield - Standard Yield)

x

Standard Material Cost Per Unit