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Q.2. A manufacturing concern which has adopted standard costing, furnished the following information: Actual: Output: 180,000...

Q.2. A manufacturing concern which has adopted standard costing, furnished the following information:

Actual:

Output: 180,000 kg.

Material used: 260,000 kg.

Cost of material: SR 650,000

Standard:                                        

Materials for 60 kg finished products: 90 kg.

Price of Materials: SR 3 per kg.

Calculate material price variance, material usage variance and material cost variance.

Solutions

Expert Solution

Actual Calculation Reference for Formula
Output (units in Kg) 180000 Given In Question
Material Used (units in Kg) 260000 Given In Question Actual Quantity
Cost of Material (units in SR) 650000 Given In Question
Cost of Material Per Kg (units in SR) 2.50 Cost of Material/Material used Actual Price
Standard Costs Calculation Reference for Formula
standard Materials per 60Kg(Units in Kg) 90 Given In Question Standard Quantity
Standard Material for 180000 KG (Units in Kg) 270000 Actual Output divided by 60kg*90Kg
Standard price of materials per Kg (Units in SR) 3 Given In Question Standard Price
Formula for calculation Answer
Material price variance = (Actual price - Standard price) * Actual quantity used = 130000.00(Unfavourable)
Material Cost Variance = (Standard Quantity x Standard Price) – (Actual Quantity x Actual Price) = 160000(Favourable)
Material Usage Variance = (Standard Quantity – Actual Quantity) * Standard Price = 30000(Favourable)

ekkarill92 answered 2 years ago
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