Management Accounting for Engineers Lecture 6

Solution to standard costing

Solution 1 :

Standarrd 1 Unit			Standard 1000 units			Actual (1000 units )
Q	P	A	Q	P	A	Q	P	A
10	2.5	2.5	10000	2.5	25000	11500	2.4	27600

1. Material COst MCV = Standard Cost Material - Actual Cost Material = 25000 - 276000 = 2600 ( Adverse )
2. Material Price Variance MPV = Actual Quantity ( Standard Price - Actual Price ) = 11500 Kg (Rs 2.50 - Rs 2.40 ) = 11,500 $\times$ 0.10 = Rs 1,150 (Favorable)
3. Material Usage Variance MUV = Standard Price ( Standard Quantity - Actual Quantity ) = Rs2.50(10,000kg - 11,500kg) = 2.50(-1500) ( Adverse ) = 3750 ( Adverse )

Verification : Material Cost Variance = Material Price Variance + Material Usage Variance Rs 2600 Adverse = Rs 1,150 Fav + Rs 3750 Adverse

Solution 2

Materials	Standard Pricing	Standard Weight Output for 36 untis	Standard Cost	Actual Weight for output of 36 Unit	Actual Price	Actual Cost
X Y Z	10 2 5	72 144 108	720 288 54	72 108 126	12 2 4	864 216 504
Total				306

Materials	Standard Pricing	Standard Weight Output for 36 untis	Standard Cost	Actual Weight for output of 36 Unit	Actual Price	Actual Cost
X Y Z	10 2 5	72 144 108	720 288 54	72 108 126	12 2 4	864 216 504
Total		324	1548	306		1584

1. Material Cost Variance = Standard - Actual Cost
2. MCV = Rs 1548 - Rs 1584
3. Material Price Variance = Actual Quantity $\times$ ( Standard Price - Actual Price )
4. MPV = AQ $\times$ (SP - AP)
5. X = 72 $\times$ (10 - 12) = 72 $\times$ 2 = 144 ( Adverse )
6. Y = 108 $\times$ (2-2) = 108 $\times$ 0 = $nil$
7. Z = 126 $\times$ (5 - 4) = 126 $\times$ 1 = 126 Favourable
8. Total = Rs 18 Adverse

Material Usage Variance = Standard price $\times$ ( Standard )

• MUV = SP ( SQ for actual output - AQ )
• X = 10 $\times$ (72 - 72) = 10 $\times$ 0 = Rs 0
• Y = 2 $\times$ ( 144 - 108 ) = 2 $\times$ 36 = Rs 72 ( Fav. )
• Z = 5 $\times$ ( 108 - 126 ) = 5 $\times$ 18 = Rs 90 Adv.
• Total MUV = 18 ADV

Solution 3

• Material Cost Variance = Standard Cost - Actual Cost

• MCV = SC - AC

• MCV = 4400 - 5200 = 800

• Material Price Variance = Actual Quantity $\times$ ( Standard Rate - Actual Rate )

• MPV = AQ $\times$ ( SR - AR )

• X = 50 $\times$ ( 50 - 50 ) = 50 $\times$ 0 = Nil

• Y = 60 $\times$ ( 40 - 45 ) =300

• Total MPV = 300

• Material Usage Variance

Solution 4

Types of Material	Standard Qty	Standard Rate	Standard	Standard Amount	Acttual Qty,	Actual Rate	Actual Amount

References

Information

• date: 2025.03.11
• time: 10:19