Question
Download Solution PDFAnswer the correct material usage variance from the information given below:
Standard material cost for manufacturing 1000 units of an output is 400 kgs of material at Rs. 2.50 per kg. When 2000 units are produced, it is found that actual consumption was of 825 kgs material at a price of Rs. 2.70 per kg.:
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFMaterial Usage Variance:
The difference between the amount of material actually used for the production level achieved and the amount anticipated to be used, based on standard consumption levels, valued at standard cost, is known as the material usage variance.
Formula: (Standard quantity of material - Actual quantity of material) x Standard price per unit.
Important Points Standard Material = 400 kgs for 1000 units = 800 kgs for 2000 units.
Actual Material = 825 kgs for 2000 units.
Standard Price = 2.50/kg
MUV = (Standard quantity of material - Actual quantity of material) x Standard price per unit.
MUV = (800 - 825) x 2.50
MUV = -25 x 2.50
MUV = Rs. 62.5 adverse
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