In a manufacturing company, materials and labour are the most important factors for production.
Raw materials are converted into semifinished goods and finished goods with the help of labour.
While manufacturing the goods, all the input goods are NOT output or yield.
There are normal and abnormal losses.
When the company cannot stop or control the loss of goods on a natural basis; it is called normal loss.
Normal losses are weight loss, shrinkage, evaporation, rust etc.
When the company can stop or control loss but could not control it, it is known as abnormal loss.
Abnormal loss is due to carelessness, fatigue, rough handling, abnormal or bad working condition, lack of proper knowledge, lowquality raw materials, machine break down, accidents etc.
We will study the following materials variances in this topic:
Materials cost variance
Materials price variance
Materials usage variance
Materials mix variance
Materials yield variance
Every manufacturing company and business organization needs human being resources.
These human beings may be the resource of administrators and labour.
Without labour, a manufacturing company cannot complete its production.
It is saying, “Talented, calibre and skilled manpower is the other assets of the business organization.”
There are three types of labour.
They are unskilled labour, semiskilled labour and skilled labour.
Unskilled labour gets fewer wages but skilled labour gets the highest wages.
The payment made to the labour in exchange for its service is called labour cost.
It is a major part of the total cost of production.
Labour cost is also commonly called wages.
Labour cost or wages is one of the major elements of cost.
Labour cost represents the expense incurred on both direct and indirect labour.
Unproductive time is known as idle time.
It may be due to normal or abnormal reasons.
In idle time, workers have been paid without any production activity.
To identify the reasons for the idle time in the factory, an idle time card is maintained.
We will study the following labour variances in this topic:
Labour rate variance
Labour efficiency variance
Labour idle time variance
Labour mix variance
Labour yield variance
Labour cost variance
Materials variances are more popularly known as materials cost variance (MCV).
The materials cost variance is the difference between the standard costs of materials used in manufacturing and actual output.
The material used is also known as materials input.
Materials variance = Standard input – Actual output
This is the difference between the actual cost incurred for direct materials and the expected (standard) cost of those materials.
It is useful for determining the ability of a business to incur materials costs close to the levels at which it had planned to incur them.
However, the expected (or standard) cost of materials can be a negotiated figure or only based on a certain purchase volume, which renders this variance less usable.
The variance can be further subdivided into the purchase price variance and the material yield variance; they are:
Purchase price variance
This is concerned solely with the price at which direct materials were acquired.
(Actual price – Standard price) × Actual quantity
Material yield variance
This is concerned solely with the number of units of the materials used in the production process.
(Actual unit usage – Standard unit usage) × Standard cost per unit
Material Variance Related to Size
A variance is considered to be material if it exceeds a certain percentage or dollar amount.
This approach to material variance is commonly used by auditors, who (for example) may ask to see explanations of all variances exhibiting a change of at least $25,000 or 15% from the preceding year.
A variation on the concept is to consider a transaction material if its presence or absence would alter the decisions of a user of a company’s financial statements.
First of all, the following variances should be found out (Requirement for materials variance):
SQ 
= Standard quantity 
Types of materials variance: 
RSQ 
= Revised standard quantity 
Materials Cost Variance (MCV) 
SR or SP 
= Standard rate or piece per unit 
Materials Price Variance (MPV) 
AQ 
= Actual quantity 
Materials Usage Variance (MUV) 
AR or AP 
= Actual rate or price per unit 
Materials Mix Variance (MMV) 
SY or SO 
= Standard yield or output 
Materials Yield Variance (MYV) 
AY or AO 
= Actual yield or output 

AQSR 
= Actual quantity × standard rate 

SQR 
= Standard quantity × standard rate 

SP_{1} 
= standard rate per unit of actual quantity used 


= AQSR ÷ AQ 

SP_{2} 
= standard rate per unit of standard quantity used = SQR ÷ SQ 

SP_{3} 
= standard rate per unit of standard output 


= SQR ÷ SY 

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The difference between the actual cost of direct materials and the standard cost of direct materials is known as materials cost variance.
This variance arises due to the difference between materials consumption/allowed or the difference between actual rates paid/determined.
MCV 
= Standard cost of materials – Actual cost of materials 
Or 
= (Standard quantity × Standard rate) – (Actual quantity × Actual rate) 
Or 
= (SQ × SR) – (AQ × AR) 


Or 
= Materials price variance + Materials usage or quality variance 
Or 
= Materials price variance + Materials mix variance + Materials yield variance 
The variance due to the difference between the standard rate and actual rate is referred to as materials price variance.
It arises due to:
Actual rate and planned rate,
Purchasing of superior or inferior quality of materials than planned,
Discount received on purchase,
Increase in custom duty, transport etc
MPV 
= Actual quantity × (Standard rate – Actual rate) 
Or 
= AQ × (SR – AR) 
The variance due to the difference between standard quantity and actual quantity consumed is known materials usage variance. These arise due to:
Increase or decrease in scrap than expected.
Inefficiency of workers.
The difference in the quality of materials than planned.
Low or high yield or output of production than expected.
Change in materials mix and production methods.
MUV 
= Standard rate × (Standard quantity – Actual quantity) 
Or 
= SR × (SQ – AO) 
If standard output and actual output differ, standard quantity should be revised
Where: Revised standard quantity (RSQ) = (Standard quantity ÷ Standard output) × Actual output
If there is a loss in question (standard or actual yield is less than input)
Where: Revised standard yield (RSY) = (Standard quantity ÷ Standard output) × Actual yield
Three (3) variances without mix and yield variance
Step1, to calculate the total cost 
Step2, to find out 

M_{1} = AQ × AR 
AQ = Actual quantity used 

M_{2 }= AQ × SR 
AR = Actual rate per unit 

M_{3} = SQ × SR 
SQ = Standard quantity specified for actual output 


SR = Standard rate per unit 



Variances: 
by table 
by formula 
Materials Price variance 
= M_{1} – M_{2} 
= AQ × (SR – AR) 
Materials Usage Variance 
= M_{2 }– M_{3} 
= SR × (SQ – AQ) 
Materials Cost Variance 
= M_{1} – M_{3} 
= (SQ × SR) – (AQ × AR) 
Keep in Mind (KIM)
· Standard quantity = Standard materials per unit × Actual output 
· If standard yield and actual yield is equal, a revised standard quantity is required: 

Revised standard quantity (RSQ) = SQ × Actual output or yield ÷ Standard output or yield 
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
Following data is available for materials X:
Standard rate of materials per kg $25
Standard quality of materials 10,000 kg
Standard rate of standard mix $250,000
Actual quality of materials 11,500 kg
Actual rate of materials per kg $24
Actual cost rate of actual mix $276,000
Required: (three variances of materials) (a) Materials price variance; (b) Materials usage variance; (c) Materials cost variance
[Answer: MPV = $11,500 F; MUV = $26,000 U; MVC = $26,000 U]
SOLUTION:
By table method:
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 


Qty/ No. 
Rate 
Qty × Rate 
Qty/ No. 
Rate 
Qty × Rate 
Std Rate × Actual Qty. 
X 
10,000 
25 
250,000 
11,500 
24 
276,000 
25 × 11,500 = 287,500 
Total 
SQ = 10,000 

SQR = 250,000 
AQ =11,500 

AQR =276,000 
AQSR = 287,500 
Again,
M_{1} = AQ × AR 
= 11,500 × 24 
= 276,000 

M_{2 }= AQ × SR 
= AQSR 
= 287,500 

M_{3} = SQ × SR 
= 10,000 × 25 
= 250,000 





Now, 



Materials Price Variance 
(MPV) = M_{1} – M_{2} 
= 276,000 – 287,500 
= (11,500) F 
Materials Usage Variance 
(MUV) = M_{2} – M_{3} 
= 287,500 – 250,000 
= 37,500 U 
Materials Cost Variance 
(MCV) = M_{1} – M_{3} 
= 276,000 – 250,000 
= 26,000 U 
By formula method:
Materials price variance (MPV)
= Actual quantity × (Standard rate – Actual rate)
= 11,500 kg ($25 – $24)
= 11,500 × $1
= $11,500 favourable
Materials usage variance (MUV)
= Standard rate × (Standard quantity – Actual quantity)
= $25 (10,000 kg – 11,500 kg)
= 25 × – 1,500
= ($37,500) unfavourable
Materials cost variance (MCV)
= (Standard quantity × Standard rate) – (Actual quantity × Actual rate)
= (10,000 kg × $25) – (11,500 kg × $24)
= 250,000 – 276,000
= ($26,000) unfavourable
Keep in Mind (KIM)
Formula method 
Table method 
Positive result or answer means favourable (F) 
Positive result or answer means unfavourable (U) or adverse (A) 
Negative result or answer means unfavourable (U) 
Negative result or answer means favourable (F) 
or adverse (A) 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
BK Chemical Industries has the following data related to product X for the month of January:
Opening stock 
175 kg 
Cost of materials purchase 
$13,50,000 
Closing stock 
200 kg 
Purchase rate 
$450 per kg 
Actual production 
2,400 kg 
Standard rate 
$400 per kg 
Standard materials required for 75 kg finished production in 100 kg raw materials
Required: (three variances of materials) (1) Materials price variance; (2) Materials usage variance; (3) Materials cost variance
[Answer: MPV = $11,500 F; MUV = $26,000 U; MVC = $26,000 U]
SOLUTION:
Given and working note:
Materials purchase quantity
= $13,50,000 ÷ $450 per kg
= 2,000 kg
Standard quantity
= Standard materials × Actual production
= 100/75 × 2,400
= 3,200
Actual quantity (AQ)
= Opening stock + Purchase – Closing stock
= 175 + 3,000 – 200
= 2,975 kg
By table method:
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 


Qty/ No. 
Rate 
Qty × Rate 
Qty/ No. 
Rate 
Qty × Rate 
Std Rate × Actual Qty. 
X 
3,200 
400 
12,80,000 
2,975 
450 
13,38,750 
400 × 2,975 = 11,90,000 
Total 
SQ = 3,200 

SQR = 12,80,000 
AQ = 2,975 

AQR = 13,38,750 
AQSR = 11,90,000 
Others
Standard Yield/output (SY) = ?
Actual yield/output (AY) = 2,400 kg
Again, 

M_{1} = AQ × AR 
= 2,975 × 450 
= 13,38,750 

M_{2 }= AQ × SR 
= AQSR 
= 11,90,000 

M_{3} = SQ × SR 
= 3,200 × 400 
= 12,80,000 





Now, 



Materials Price Variance (MPV) 
= M_{1} – M_{2} 
= 13,38,750 – 11,90,000 
= 148,750 U 
Materials Usage Variance (MUV) 
= M_{2} – M_{3} 
= 11,90,000 – 12,80,000 
= (90,000) F 
Materials Cost Variance (MCV) 
= M_{1} – M_{3} 
= 13,38,750 – 12,80,000 
= 58,750 U 
By formula method:
Materials price variance (MPV)
= Actual quantity × (Standard rate – Actual rate)
= 2,975 kg ($400 – $450)
= 2,975 × –$50
= ($148,750) unfavourable
Materials usage variance (MUV)
= Standard rate × (Standard quantity – Actual quantity)
= $400 (3,200 kg – 2,975 kg)
= 400 × 225
= $90,000 favourable
Materials cost variance (MCV)
= (Standard quantity × Standard rate) – (Actual quantity × Actual rate)
= (3,200 kg × $400) – (2,975 kg × $450)
= $12,80,0000 – $13,38,750
= ($58,750) unfavourable
(4) Materials mix variance, MMV
When a product needs more two or more than two raw materials, it is known as materials mix.
Materials quantities are estimated according to output.
There may be normal or abnormal loss of quantity to compare input and output of the quantity.
The variance due to the difference between standard composition and actual composition is known as materials mix variance.
It is related to materials input.
There are two types of materials mix variance.
Standard quantity and actual mix are equal but the standard ratio and actual mix ratio is different.
MMV
= Standard rate × (Standard quantity – Actual quantity)
= SR × (SQ – AQ)
Standard quantity and actual mix are as well as standard ratio and actual mix ratio is different.
= (Total Qty of actual mix ÷ Total Qty of standard mix) × (Standard quantity × standard rate) – (SR × AQ)
= Standard rate × (Revised standard quantity – Actual quantity)
= SR × (RSQ – AQ)
MMV
RSQ = AQ÷SQ × Standard quantity of particular materials
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
ABC Manufacturing Company (P) Ltd has the following data related to materials:
Materials 
Standard 
Actual 


Kg (Q) 
Rate 
Amount 
Kg (Q) 
Rate 
Amount 
A 
10 
20 
200 
5 
30 
150 
B 
20 
30 
600 
10 
60 
600 
C 
20 
60 
1,200 
15 
50 
750 
There is not any loss in quality while manufacturing. Therefore actual yield is 50 units.
Required: (a) Materials price variance; (b) Materials mix variance; (c) Materials usage variance; (d) Materials cost variance
[Answer: MPV = $(200) U; MMV = $(100) U;
MUV = $700 F; MCV = $500 F]
SOLUTION:
Given and working note:

SQ 
SR 
AQ 
AR 

A 
10 
20 
5 
30 

B 
20 
30 
10 
60 

C 
20 
60 
15 
50 







By formula method:
Materials price variance (MPV)
MPV 
= AQ (SR – AR) 


A 
= 5 (20 – 30) 
= 5 × – 10 
= (50) U 
B 
= 10 (30 – 60) 
= 10 × – 30 
= (300) U 
C 
= 15 (60 – 50) 
= 15 × 10 
= 150 F 



(200) U 
Materials mix variance (MMV)
= (Total Qty of actual mix ÷ Total Qty of standard mix) × (Standard quantity × standard rate) – (SR × AQ)
= (30÷50) × [(10×20) + (20×30) + (20×60)] – [(20×5) + (30×10) + (60×50)]
= 0.6 × 2,000 – [1,300]
= 1,200 – 1,300
= ($100) U
Alternative,
MMV 
= SR × (RSQ – AQ) 


A 
= 20 (6 – 5) 
= 20 × 1 
= 20 
B 
= 30 (12 – 10) 
= 30 × 2 
= 60 
C 
= 60 (12 – 15) 
= 60 × – 3 
= (180) 


Total 
(100) U 
Given and working note:
Revised standard quantity (RSQ) 
= AQ ÷ SQ × Standard quantity of particular materials 

A 
= 30÷50 × 10 
= 6 
B 
= 30÷50 × 20 
= 12 
C 
= 30÷50 × 20 
= 12 
Materials usage variance (MUV)
MUV 
= SR × (SQ – AQ) 


A 
= 20 (10 – 5) 
= 20 × 5 
= 100 F 
B 
= 30 (20 – 10) 
= 30 × 10 
= 300 F 
C 
= 60 (20 – 15) 
= 60 × 5 
= 300 F 


Total 
700 F 
Materials cost variance (MCV)
MCV 
= (SQ × SR) – (AQ × AR) 


A 
= (10 × 20) – (5 × 30) 
= 200 – 150 
= 50 F 
B 
= (20 × 30) – (10 × 60) 
= 600 – 600 
= Nil 
C 
= (20 × 60) – (15 × 50) 
= 1,200 – 750 
= 450 F 


Total 
500 F 
Keep in Mind (KIM)
If standard output and actual output is not equal, a revised standard quantity is required. 
Assume standard yield and actual yield 1 if there is no value in the question. 
If there are differences between the standard quantity of materials and the actual quantity of materials, an answer of mix variance and yield variance is different in the table method and formula method. 
By table method:
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 

Qty/ No. 
Rate 
Qty × Rate 
Qty/ No. 
Rate 
Qty × Rate 
Std Rate × Actual Qty. 

A 
10 
20 
200 
5 
30 
150 
20 × 5 = 100 
B 
20 
30 
600 
10 
60 
600 
30 × 10 = 300 
C 
20 
60 
1,200 
15 
50 
750 
60 × 15 = 900 
Total 
SQ = 50 

SQR =2,000 
AQ = 30 

AQR = 1,500 
AQSR = 1,300 
Others
Standard Yield/Output (SY) = 50 kg
Actual Yield/Output (AY) = 50 Kg
SP_{1 }= standard rate per unit of actual quantity used = AQSR ÷ AQ = 1,300 ÷ 30 = 43.33
SP_{2} = standard rate per unit of standard quantity used = SQR ÷ SQ = 2,000 ÷ 50 = 40
Again,
M_{1} 
= AQ × AR 
= AQR 
= 1,500 
M_{2} 
= AQ × SP_{1} 
= 30 × 43.33 
= 1,300 
M_{3} 
= AQ × SP_{2} 
= 30 × 40 
= 1,200 
M_{4} 
= AY × SP_{2} 
= 50 × 40 
= 2,000 
Now,
Materials Price Variance (MPV) = M_{1} – M_{2} = 1,500 – 1,300 = 200 U
Materials Mix Variance (MMV) = M_{2} – M_{3} = 1,300 – 1,200 = 100 U
Materials Usage Variance (MUV) = M_{2} – M_{4} = 1,300 – 2,000 = (700) F
Materials Cost Variance (MCV) = M_{1} – M_{4} = 1,500 – 2,000 = (500) F
Here, materials yield means output of the materials.
It is also known as materials subusage variance.
The manufacturing company estimates its output at the time of the production.
But, there may be differences between actual output and standard output.
Variance or difference is due to normal or abnormal loss at the time of production.
There are two methods for materials yield variance:
(1) When actual mix (quantity) and standard mix (quantity) are not vary/difference: (when a standard loss is not given)
MYV 
= Standard cost per unit (Actual yield or output – Standard yield for actual input) 
Or 
= SC × (AY – SY) 
Standard cost per unit (SC) = Total standard cost ÷ Net standard yield or SR_{3}
(2) When actual mix (quantity) and standard mix (quantity) are vary/difference: (when a standard loss is given)
MYV 
= Standard cost per unit (Actual yield – Revised standard yield) 
Or 
= SC × (AY – RSY) 
Revised standard yield = Actual input – (Actual input @ standard loss %)
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
The following data related to materials are given by Om Manufacturing Company:
Standard materials mix 
Actual materials mix 

Materials 
Units 
Rate 
Materials 
Units 
Rate 
M 
700 
100 
A 
400 
110 
N 
300 
50 
B 
200 
60 
Additional information:
Standard materials have 15% loss while actual materials have 10% loss
Required: (1) Materials price variance; (2) Materials mix variance; (3) Materials usage variance; (4) Materials cost variance;
(5) Materials yield variance
[Answer: MPV = $6,000 U; MMV = $1,000 U; MYV = ($3,000) F;
MUV = ($4,000) F; MCV = $2,000 U]
SOLUTION:
(By table method)
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 

Qty/ No. 
Rate 
Qty × Rate 
Qty/ No. 
Rate 
Qty × Rate 
Std Rate × Actual Qty. 

M 
700 
100 
70,000 
400 
110 
44,000 
100 × 400 = 40,000 
N 
300 
50 
15,000 
200 
60 
12,000 
50 × 200 = 10,000 
Total 
SQ = 1,000 

SQR = 85,000 
AQ = 600 

AQR = 66,000 
AQSR = 50,000 
Others
Standard yield (SY) (1,000–1,000 @15%) = 8580 kg
Actual yield (AY) (600–600 @10%) = 540 Kg
SP_{1 }= standard price per unit of actual quantity used = AQSR ÷ AQ = 50,000 ÷ 600 = 83.33
SP_{2 }= standard price per unit of standard quantity used = SQR ÷ SQ = 85,000 ÷ 1,000 = 85
SP_{3 }= standard price per unit of standard output = SQR ÷ SY = 85,000 ÷ 850 = 100
Again,
M_{1} = AQ × AR = AQR = 56,000
M_{2 }= AQ × SP_{1} = 600 × 83.33 = 50,000
M_{3} = AQ × SP_{2} = 600 × 85 = 51,000
M_{4} = AY × SP_{3} = 540 × 100 = 54,000
Now,
Materials Price Variance (MPV) = M_{1} – M_{2} = 56,000 – 50,000 = $6,000 U
Materials Mix Variance (MMV) = M_{2} – M_{3} = 50,000 – 51,000 = $1,000 U
Materials Yield Variance (MYV) = M_{3} – M_{4} = 51,000 – 54,000 = $(3,000) F
Materials Usage Variance (MUV) = M_{2} – M_{4} = 50,000 – 54,000 = $(4,000) F
Materials Cost Variance (MCV) = M_{1} – M_{4} = 56,000 – 54,000 = $2,000 U
By formula method:
Materials price variance (MPV)
MPV 
= AQ (SR – AR) 


M 
= 400 (100 – 110) 
= 400 × – 10 
= (4,000) U 
N 
= 200 (50 – 60) 
= 200 × – 10 
= (2,000) U 


Total 
(6,000) U 
Materials mix variance (MMV)
MMV 
= SR × (RSQ – AQ) 


M 
= 100 × (420 – 400) 
= 100 × 20 
= 2,000 F 
N 
= 50 × (180 – 200) 
= 50 × – 20 
= (1,000) U 


Total 
1,000 F 
Where:
Revised standard quantity (RSQ) 
= AQ ÷ SQ × Standard quantity of particular materials 

M 
= 600 ÷ 1,000 × 700 
= 420 
N 
= 200 ÷ 1,000 × 300 
= 180 
Materials yield variance (MYV)
= SC × (AY – RSY)
= 100 (540 – 510)
= 100 × 30
= 3,000 F
Where:
SC = Total standard cost ÷ Standard output or SR
= $85,000 ÷ 850 kg
= 100
Revised standard yield
= Actual input – (Actual input @ standard loss %)
= 600 – 600@15%
= 510
Materials usage variance (MUV)
MUV 
= SR × (RSY – AQ) 


M 
= 100 × (444.71 – 400) 
= 100 × 44.71 
= 4,471 F 
N 
= 50 v (190.59 – 200) 
= 50 × – 9.41 
= (471) U 


Total 
= 4,000 F 
Where:
Revised standard yield (RSY) 
= (Standard quantity ÷ Standard yield) × Actual yield 

M 
= 700 ÷ 850 × 540 
= 444.71 
N 
= 300 ÷ 850 × 540 
= 190.59 
Materials cost variance (MCV)
MCV 
= (SQ × SR) – (AQ × AR) 


M 
= (444.71 × 100) – (400 × 110) 
= 44,471 – 44,000 
= 471 F 
N 
= (190.59 × 50) – (200 × 60) 
= 9,529 – 12,000 
= (2,471) U 


Total 
(2,000) U 
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1E
The following data related to materials are given by Pedilight Chemical Ltd:
Standard materials mix 
Actual materials mix 

Materials 
Units/kg 
Rate 
Materials 
Units/kg 
Rate 
A 
80 
300 
A 
83 
250 
B 
120 
400 
B 
119 
425 
Additional information:
Standard materials have 15% loss while actual output is 170 kg
Required: (1) Materials price variance; (2) Materials mix variance; (3) Materials yield variance; (4) Materials usage variance;
(5) Materials cost variance; (6) Verify the result (MCV, MUV)
[Answer: MPV = ($1,175) F; MMV = ($220) F; MYV = ($3,828) F;
MUV = ($4,048) F; MCV = ($5,223) F]
SOLUTION:
By table method:
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 

Qty/ No. 
Rate 
Qty × Rate 
Qty/ No. 
Rate 
Qty × Rate 
Std Rate × Actual Qty. 

A 
80 
300 
24,000 
83 
250 
20,750 
300 × 83 = 24,900 
B 
120 
400 
48,000 
119 
425 
50,575 
400 × 119 = 47,600 
Total 
SQ = 200 

SQR = 72,000 
AQ = 202 

AQR = 71,325 
AQSR = 72,500 
Others
Standard yield (SY) (200 – 200@15%) = 170 Kg Actual yield (AY) (given) = 170 Kg
Again,
Now,

Standard yield (SY) (200 – 200@15%) = 170 Kg
Actual yield (AY) (given) = 170 Kg
SP_{1 }= standard price per unit of actual quantity used 
= AQSR ÷ AQ 
= 72,500 ÷ 202 
= 358.91 
SP_{2 }= standard price per unit of standard quantity used 
= SQR ÷ SQ 
= 72,000 ÷ 200 
= 360.00 
SP_{3 }= standard price per unit of standard output 
= SQR ÷ SY 
= 72,000 ÷ 170 
= 423.53 
Again,
M_{1} 
= AQ × AR 
= AQR 
= 71,325 
M_{2} 
= AQ × SP_{1} 
= 202 × 358.91 
= 72,500 
M_{3} 
= AQ × SP_{2} 
= 202 × 360.00 
= 72,720 
M_{4} 
= AY × SP_{3} 
= 170 × 423.53 
= 72,000 
Now,
Materials Price Variance (MPV) = M_{1} – M_{2} 
= 71,325 – 72,500 
= ($1,175) F 
Materials Mix Variance (MMV) = M_{2} – M_{3} 
= 72,500 – 72,720 
= ($220) F 
Materials Yield Variance (MYV) = M_{3} – M_{4} 
= 72,720 – 72,000 
= $720 U 
Materials Usage Variance (MUV) = M_{2} – M_{4} 
= 72,500 – 72,000 
= $500 U 
Materials Cost Variance (MCV) = M_{1} – M_{4} 
= 71,325 – 72,000 
= ($675) F 
Verification:
Materials cost variance 
= Materials price variance + Materials usage variance 
(675) 
= (1,175) + 500 
(675) 
= (675) proved 


Or MCV 
= MPV + MMV + MYV 
(675) 
= (1,175) + (220) + 720 
(675) 
= (675) proved 


Materials usage variance 
= Materials mix variance + Materials yield variance 
500 
= (220) + 720 
500 
= 500 proved 
By formula method:
Materials price variance (MPV)
MPV 
= AQ (SR – AR) 


M 
= 83 (300 – 250) 
= 83 × 50 
= 4150 F 
N 
= 119 (400 – 425) 
= 119 × – 25 
= (2,975) U 


Total 
= 1,175 F 
Materials mix variance (MMV)
MMV 
= SR × (RSQ – AQ) 


M 
= 300 × (80.8 – 83) 
= 300 × –2.2 
= (660) U 
N 
= 400 × (121.2 – 119) 
= 400 × 2.2 
= 880 


Total 
= 220 F 
Where:
Revised standard quantity (RSQ)
= (AQ ÷ SQ) × Standard quantity of particular materials
M = 202 ÷ 200 × 80 = 80.8
N = 202 ÷ 200 × 120 = 121.2
Materials yield variance (MYV)
= SC × (AY – RSY)
= 423.5 × (170 – 171.7)
= 423.5 × –1.7
= (720) U
Where:
SC = (Total standard cost ÷ Standard output) or SR_{3 }
= $72,000 ÷ 170 kg
= 423.5
Revised standard yield
= Actual input – (Actual input @ standard loss %)
= 202 – 202@15%
= 171.7
Materials usage variance (MUV)
MUV 
= SR × (SQ – AQ) 


M 
= 300 × (80 – 83) 
= 300 × –3 
= (900) U 
N 
= 400 × (120 – 119) 
= 400 × 1 
= 400 F 


Total 
= (500) U 
Materials cost variance (MCV)
MCV 
= (SQ × SR) – (AQ × AR) 


M 
= (80 × 300) – (83 × 250) 
= 24,000 – 20,750 
= 3,250 F 
N 
= (120 × 400) – (119 × 425) 
= 48,000 – 50,575 
= (2,575) U 


Total 
= 675 F 
Keep in Mind (KIM)
Material cost variance, materials price variance, materials usage variance, materials mix variance are the part of the input. 
Materials yield variance is the part of the output. 
Here, ‘of’ means multiply 
Materials subusage variance means materials yield or output variance. 
If standard yield and actual yield in not equal, revised standard time (RST) is applied in place of standard time. 
In materials variances SP_{1,} SP_{2} and SP_{3 } 
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TU Questions and Solutions
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2060/S Modified
Direct materials consumption details and standards have been presented below:
Standard 
Actual 

Materials 
No. 
Rate ($) 
Cost ($) 
Materials 
No. 
Rate ($) 
Cost ($) 
A 
30 
5 
150 
A 
25 
6.00 
150 
B 
30 
3 
90 
B 
35 
2.80 
98 
C 
40 
2 
80 
C 
40 
2.10 
84 

100 

320 

100 

332 
Less: Process loss 
20 


Less: Process loss 
12 


80 



88 


Required: (direct): (a) Materials yield variance; (b) Materials mix variance; (c) May usage variance; (d) Materials price variance;
(e) Materials cost variance
[Answer: MPV = 22 U; MMV = (10) F; MYV = (32) F; MUV = (42) F; MCV = (20) F]
SP_{1 }= 3.1; SP_{2} = 3.2; SP_{3} = 4
SOLUTION
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 

SQ 
SR 
SQ × SR 
AQ 
AR 
AQ × AR 
Std rate × Actual No. 

A 
30 
5 
150 
25 
6.00 
150 
5 × 25 = 125 
B 
30 
3 
90 
35 
2.80 
98 
3 × 35 = 105 
C 
40 
2 
80 
40 
2.10 
84 
2 × 40 = 80 
Total 
SQ = 100 

SQR = 320 
AQ = 100 

AQR = 332 
AQSR = 310 
Others
Standard yield (SY) 80 units 

Actual yield (AY) 88 units 

SP_{1 }= standard price per unit of actual quantity used 
= AQSR ÷ AQ 
= 310 ÷ 100 
= 3.1 

SP_{2} = standard price per unit of standard quantity used 
=SQR ÷ SQ 
= 320 ÷ 100 
= 3.2 

SP_{3} = standard price per unit of standard output 
= SQR ÷ SY 
= 320 ÷ 80 
= 4.0 



Again 

M_{1} 
= AQ × AP 
= AQR 
= 332 

M_{2} 
= AQ × SP_{1} 
= 100 × 3.1 
= 310 

M_{3} 
= AQ × SP_{2} 
= 100 × 3.2 
= 320 

M_{4} 
= AY × SP_{3} 
= 88 × 4 
= 352 



Now, 

Materials price variance (MPV) 
= M_{1} – M_{2} 
= 332 – 310 
= 22 U 

Materials mix variance (MMV) 
= M_{2} – M_{3} 
= 310 – 320 
= (10) F 

Materials yield variance (MYV) 
= M_{3} – M_{4} 
= 320 – 352 
= (32) F 

Materials usage variance (MUV) 
= M_{2} – M_{4} 
= 310 – 352 
= (42) F 

Materials cost variance (MCV) 
= M_{1} – M_{4} 
= 332 – 352 
= (20) F 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2062 Modified
A Manufacturing Company has adopted a standard costing system in its production cost control system. The data relating to certain batches of output have been given below:
Standard:
Material A 30%@ $4 per kg
Material B 20%@ $6 per kg
Material C 50%@ $2 per kg
Standard output 80 kg of the finished product
Actual production realized 800 kg of finished product. Actual material used in production:
Actual:
Material A 330 kg @ $3.80
Material B 180 kg @ $6.50
Material C 590 kg @ $1.80
Required: (direct): (a) Materials yield variance; (b) Materials mix variance; (c) May usage variance; (d) Materials price variance;
(e) Materials cost variance
[Answer: MPV = (94) F; MMV = (160) F; MYV = 340 U;
MUV = 180 U; MCV = 86 U] *SP_{1 }= 3.255; SP_{2} = 3.4; SP_{3} = 4.25
SOLUTION
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 

SQ 
SR 
SQ × SR 
AQ 
AR 
AQ × AR 
Std rate × Actual No. 

A 
30 
4 
120 
330 
3.80 
1,254 
4 × 330 = 1,320 
B 
20 
6 
120 
180 
6.50 
1,170 
6 × 180 = 1,080 
C 
50 
2 
100 
590 
1.80 
1,062 
2 × 590 = 1,180 
Total 
SQ = 100 

SQR= 340 
AQ=1,100 

AQR =3,486 
AQSR = 3,580 
Others
Standard yield (SY) 80 units 

Actual yield (AY) 800 units 

SP_{1} 
= standard price per unit of actual quantity used 
= AQSR ÷ AQ 
= 3,580 ÷ 1,100 
= 3.255 

SP_{2} 
= standard price per unit of standard quantity used 
= SQR ÷ SQ 
= 340 ÷ 100 
= 3.4 

SP_{3} 
= standard price per unit of standard output 
= SQR ÷ SY 
= 340 ÷ 80 
= 4.25 



Again 

M_{1} 
= AQ × AP 
= AQR 
= 3,486 

M_{2} 
= AQ × SP_{1} 
= 1,100 × 3.255 
= 3,580 

M_{3} 
= AQ × SP_{2} 
= 1,100 × 3.4 
= 3,740 

M_{4} 
= AY × SP_{3} 
= 800 × 4.25 
= 3,400 



Now, 

Materials price variance (MPV) 
= M_{1} – M_{2} 
= 3,486 – 3,580 
= (94) F 

Materials mix variance (MMV) 
= M_{2} – M_{3} 
= 3,580 – 3,740 
= (160) F 

Materials yield variance (MYV) 
= M_{3} – M_{4} 
= 3,740 – 3,400 
= 340 U 

Materials usage variance (MUV) 
= M_{2} – M_{4} 
= 3,580 – 3,400 
= 180 U 

Materials cost variance (MCV) 
= M_{1} – M_{4} 
= 3,486 – 3,400 
= 86 U 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2066 Modified
The standard materials cost to produce 138 units of a product is:
100 units of materials X @ $10
50 units of materials Y @ $8
During the period, 144 units of product were produced from the usage of:
80 units of materials X @ $11
70 units of materials Y @ $8
Required: (a) Materials price variance; (b) Materials mix variance; (c) Materials yield variance; (d) Materials usage variance
[Answer: MPV = $80 U; MMV = ($40) F; MYV = ($60) F; MUV = ($100) F]
*SP_{1 }= 9.067; SP_{2} = 9.333; SP_{3} = 10.14
SOLUTION
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 


Qty/ No. 
Rate 
Qty × Rate 
Qty/ No. 
Rate 
Qty × Rate 
Std. rate × Actual No. 
X 
100 
10 
1,000 
80 
11 
880 
10 × 80 = 800 
Y 
50 
8 
400 
70 
8 
560 
8 × 70 = 560 
Total 
SQ = 150 

SQR = 1,400 
AQ = 150 

AQR = 1,440 
AQSR = 1,360 
Others
Standard yield (SY) 138 units 

Actual yield (AY) 144 units 



SP_{1} 
= standard price per unit of actual quantity used 
= ASQR ÷ AQ = 1,360 ÷ 150 
= 9.067 

SP_{2} 
= standard price per unit of standard quantity used 
= SQR ÷ SQ = 1,400 ÷ 1580 
= 9.333 

SP_{3} 
= standard price per unit of standard output 
= SQR ÷ SY = 1,400 ÷ 138 
= 10.14 



Again, 

M_{1} 
= AQ × AP 
= AQR 
= 1,440 

M_{2} 
= AQ × SP_{1} 
= 150 × 9.067 
= 1,360 

M_{3} 
= AQ × SP_{2} 
= 150 × 9.333 
= 1,400 

M_{4} 
= AY × SP_{3} 
= 144 × 10.14 
= 1,460 



Now, 

Materials price variance (MPV) 
= M_{1} – M_{2} 
= 1,440 – 1,360 
= 80 U 

Materials mix variance (MMV) 
= M_{2} – M_{3} 
= 1,360 – 1,400 
= (40) F 

Materials yield variance (MYV) 
= M_{3} – M_{4} 
= 1,400 – 1,460 
= (60) F 

Materials usage variance (MUV) 
= M_{2} – M_{4} 
= 1,360 – 1,460 
= (100) F 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
TU: 2067 Modified
A Manufacturing Company has adopted a standard costing system in its production cost control system. The following details of material standard and actual consumption have been provided:
Materials 
Standard 
Actual 


Qty in units 
Price/unit 
Qty in units 
Price/unit 
A 
1 
$5 
200 
$5.50 
B 
3 
$4 
380 
$4.00 
C 
6 
$3 
720 
$3.00 

Standard loss 10% 

Actual output 1,170 units 
Required: (a) Materials price variance; (b) Materials mix variance
(c) Materials yield variance; (d) Materials usage variance; (e) Materials cost variance
[Answer: MPV = 100 U; MMV = 130 U; MYV = Nil; MUV = 130 U; MCV = 230 U]
SP_{1 }= 3.6; SP_{2} = 3.5; SP_{3} = 3.89
SOLUTION
Given and working note:
Materials 
Standard 
Actual 
Standard × Actual 


SQ 
SR 
SQ × SR 
AQ 
AR 
AQ × AR 
Std rate × Actual No. 
A 
1 
5 
5 
200 
5.5 
1,100 
5 × 200 = 1,000 
B 
3 
4 
12 
380 
4.0 
1,520 
4 × 380 = 1,520 
C 
6 
3 
18 
720 
3.0 
2,160 
3 × 720 = 2,160 
Total 
SQ = 10 

SQR = 35 
AQ = 1,300 

AQR = 4,780 
AQSR = 4,680 
Others
Standard yield (SY 10 – 10@10%) = 9 kg 

Actual yield (AY) = 1,170 kg 



SP_{1} 
= standard price per unit of actual quantity used 
= AQSR ÷ AQ 
= 4,680 ÷ 1,300 
= 3.6 

SP_{2} 
= standard price per unit of standard quantity used 
= SQR ÷ SQ 
= 35 ÷ 10 
= 3.5 

SP_{3} 
= standard price per unit of standard output 
= SQR ÷ SY 
= 35 ÷ 9 
= 3.89 or 35/9 



Again 

M_{1} 
= AQ × AR 
= AQR 
= 4,780 

M_{2} 
= AQ × SP_{1} 
= 1,300 × 3.6 
= 4,680 

M_{3} 
= AQ × SP_{2} 
= 1,300 × 3.5 
= 4,550 

M_{4} 
= AY × SP_{3} 
= 1,170 × 35/9 
= 4,550 



Now, 

Materials price variance (MPV) 
= M_{1} – M_{2} 
= 4,780 – 4,680 
= 100 U 

Materials mix variance (MMV) 
= M_{2} – M_{3} 
= 4,680 – 4,550 
= 130 U 

Materials yield variance (MYV) 
= M_{3} – M_{4} 
= 4,550 – 4,550 
= Nil 

Materials usage variance (MUV) 
= M_{2} – M_{4} 
= 4,680 – 4,550 
= 130 U 

Materials cost variance (MCV) 
= M_{1} – M_{4} 
= 4,780 – 4,550 
= 230 U 

#####
Problems and Answers of Standard Costing for Materials 
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
The following data related to materials are given:
Standard materials mix 
Actual materials mix 

Materials 
Units 
Rate 
Amount 
Materials 
Units 
Rate 
Amount 
A 
600 
15 
9,000 
A 
500 
24 
12,000 
B 
200 
35 
7,000 
B 
100 
60 
6,000 
There is not any loss during production.
Required: (a) Materials price variance; (b) Materials mix variance; (c) Materials usage variance; (d) Materials cost variance
[Answer: MPV = $7,000 U; MMV = $1,000 F; MUV = $5,000 F;
MCV = $2,000 U* SP_{1} = 18.33; SP_{2} = 20
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
The following data related to materials are given:
Standard materials mix 
Actual materials mix 

Materials 
Kg 
Rate 
Materials 
Kg 
Rate 
M 
200 
20 
M 
100 
35 
N 
400 
25 
N 
200 
20 
O 
400 
30 
O 
500 
25 
Standard and actual outputs were 1,000 units. Standard loss is 10% and actual output is 750 units.
Required: (a) Materials price variance; (b) Materials mix variance; (c) Materials yield variance; (d) Materials usage variance;
(e) Materials cost variance
[Answer: MPV = $2,000 F; MMV = $1,200 U;
MYV = $867 F; MUV = $333 U;
MCV = $1,667 F *SP_{1} = 27.50; SP_{2} = 26; SP_{3} = 28.889
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
The standards cost for a product of the company shows the standard of the following material:
Standard 
Actual 

Materials 
Quantity 
price per kg 
Materials 
Quantity 
price per kg 
A 
4 kg 
$5 
A 
150 kg 
$4 
B 
1 kg 
$10 
B 
40 kg 
$10 
C 
5 kg 
$20 
C 
210 kg 
$25 
The standard loss is 10% Actual output of the finished product is 380 kg.
Required: (1) (a) Material mixed variance; (b) Material yield variance; (c) Material price variance
(2) Write down any four advantages of standard costing
[Answer: MPV = $900 U; MMV = $150 U; MYV = ($287) F]
*SP_{1 }= 13.375; SP_{2} = 13; SP_{3} = 14.44
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
The following details material standard and consumption have been provided
Materials 
Standard 
Actual 

Quantity 
Rate 
Cost 
Quantity 
Rate 
Cost 

A 
2 
4 
8 
190 
4.00 
760 
B 
3 
3 
9 
290 
3.00 
899 
C 
5 
2 
10 
510 
1.80 
918 

10 

$27 
990 

$2,577 
Standard output 8 units and actual output 800 units
Required: (a) Material yield variance; (b) Materials mix variance; (c) Materials use variance; (d) Materials price variances
[Answer: MPV = ($73) F; MMV = ($23) F; MYV = ($27) F; MUV = ($50) F]
SP_{1 }= 2.677; SP_{2} = 2.7; SP_{3} = 3.375
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