ABC company gives you the following standard & actual data: Raw material Standard Actual : : : Quantity Price per kg Quantity Price per kg A 80 Kgs Rs. 10 70 Kgs Rs. 11 B 20 Kgs Rs. 20 30 Kgs Rs. 18…

Material Cost Variance Analysis

1. Standard Cost (SC):

   • Material A: $80\text{ kg}\times 10=\text{Rs. }800$
   • Material B: $20\text{ kg}\times 20=\text{Rs. }400$
   • Total SC = Rs. 1,200

2. Actual Cost (AC):

   • Material A: $70\text{ kg}\times 11=\text{Rs. }770$
   • Material B: $30\text{ kg}\times 18=\text{Rs. }540$
   • Total AC = Rs. 1,310

3. Material Cost Variance (MCV): $$\text{MCV}=\text{AC}-\text{SC}=1,310-1,200=\text{Rs. 110 (Adverse)}$$

Breakdown of Variances

• Material Price Variance (MPV):

  • Material A: $(11-10)\times 70=\text{Rs. }70\text{ (Adverse)}$
  • Material B: $(18-20)\times 30=\text{Rs. }-60\text{ (Favorable)}$
  • Total MPV = Rs. 10 (Adverse)

• Material Usage Variance (MUV):

  • Material A: $(70-80)\times 10=\text{Rs. }-100\text{ (Favorable)}$
  • Material B: $(30-20)\times 20=\text{Rs. }200\text{ (Adverse)}$
  • Total MUV = Rs. 100 (Adverse)

Verification: $$\text{MPV}+\text{MUV}=10+100=\text{Rs. 110 (Adverse)}$$