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The standard cost of a chemical mixture is as under 8 tons of material A at Rs. 40 per ton 12 tons of material B at Rs. 60 per ton Standard yield is 90% of input Actual cost for a period is as under: 10 tons of material A at Rs. 30 per ton 20 tons of material B at Rs. 68 per ton Actual yield is 26.5 tons Compute all materials variance?
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The standard cost of a chemical mixture is as under 8 tons of material...
Materials Variance Calculation
The standard cost of the chemical mixture is based on the following:
- 8 tons of material A at Rs. 40 per ton
- 12 tons of material B at Rs. 60 per ton
- Standard yield is 90% of input
The actual cost for a period is as follows:
- 10 tons of material A at Rs. 30 per ton
- 20 tons of material B at Rs. 68 per ton
- Actual yield is 26.5 tons
Step 1: Calculate Standard Cost
The standard cost of the chemical mixture can be calculated as follows:
- Material A cost = 8 tons x Rs. 40 per ton = Rs. 320
- Material B cost = 12 tons x Rs. 60 per ton = Rs. 720
- Total standard cost = Rs. 320 + Rs. 720 = Rs. 1040
Step 2: Calculate Actual Cost
The actual cost of the chemical mixture can be calculated as follows:
- Material A cost = 10 tons x Rs. 30 per ton = Rs. 300
- Material B cost = 20 tons x Rs. 68 per ton = Rs. 1360
- Total actual cost = Rs. 300 + Rs. 1360 = Rs. 1660
Step 3: Calculate Materials Price Variance
The materials price variance can be calculated as follows:
- Material A price variance = (10 tons x Rs. 30 per ton) - (10 tons x Rs. 40 per ton) = -Rs. 100
- Material B price variance = (20 tons x Rs. 68 per ton) - (20 tons x Rs. 60 per ton) = Rs. 160
- Total materials price variance = -Rs. 100 + Rs. 160 = Rs. 60 (Favorable)
Step 4: Calculate Materials Usage Variance
The materials usage variance can be calculated as follows:
- Standard input = 8 tons + 12 tons = 20 tons
- Actual input = 10 tons + 20 tons = 30 tons
- Standard cost per unit = Rs. 1040 / 20 tons = Rs. 52 per ton
- Materials usage variance = (20 tons x 90%) - 26.5 tons x Rs. 52 per ton = -Rs. 286 (Unfavorable)
Step 5: Interpretation of Results
The materials variance analysis shows that the total materials variance is Rs. 226 (Favorable). The favorable variance is mainly due to the materials price variance. The unfavorable variance in the materials usage variance is due to the actual yield being lower than the
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The standard cost of a chemical mixture is as under 8 tons of material A at Rs. 40 per ton 12 tons of material B at Rs. 60 per ton Standard yield is 90% of input Actual cost for a period is as under: 10 tons of material A at Rs. 30 per ton 20 tons of material B at Rs. 68 per ton Actual yield is 26.5 tons Compute all materials variance?
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