Banku manufacturing Ltd. is engaged in producing a item named 'ABC'. It produces 'ABC' in a batch of 100 kgs. Standard material inputs required for…

CA Intermediate · Cost and Management Accounting · RTP · January 2025
Banku manufacturing Ltd. is engaged in producing a item named 'ABC'. It produces 'ABC' in a batch of 100 kgs. Standard material inputs required for 100 kgs. of 'ABC' are as below: Material Quantity (in kgs.) Rate per kg. (in ₹) A 50 110 B 30 320 C 30 460 During the month of April, 2024, actual production was 50,000 kgs. of 'ABC' for which the actual quantities of material used for a batch and the prices paid thereof are as under: Material Quantity (in kgs.) Rate per kg. (in ₹) A 60 115 B 25 330 C 20 405 You are required to CALCULATE the following variances based on the above given information for the month of April, 2024 for Banku manufacturing Ltd.: (i) Material Cost Variance; (ii) Material Price Variance; (iii) Material Usage Variance; (iv) Material Mix Variance; (v) Material Yield Variance.

Suggested Answer and Working Notes:

(i) Material SQ* x SP (₹) AQ** x SP (₹) AQ** × AP (₹) RSQ*** x SP (₹) A 27,50,000 (25,000 kg. × ₹ 110) 33,00,000 (30,000 kg. × ₹ 110) 34,50,000 (30,000 kg. × ₹ 115) 26,24,600 (23,860 kg. × ₹ 110) B 48,00,000 (15,000 kg. × ₹ 320) 40,00,000 (12,500 kg. × ₹ 320) 41,25,000 (12,500 kg. × ₹ 330) 45,82,400 (14,320 kg. × ₹ 320) C 69,00,000 (15,000 kg. x 460) 46,00,000 (10,000 kg. × ₹ 460) 40,50,000 (10,000 kg. × ₹ 405) 65,87,200 (14,320 kg. × ₹ 460) Total 1,44,50,000 1,19,00,000 1,16,25,000 1,37,94,200 * Standard Quantity of materials for actual output: A = (50 kgs. / 100 kgs) × 50,000 kgs. = 25,000 kgs. B = (30 kgs. / 100 kgs) × 50,000 kgs. = 15,000 kgs. C = (30 kgs. / 100 kgs) × 50,000 kgs. = 15,000 kgs. ** Actual Quantity of Material used for actual output: A = (60 kgs. / 100 kgs) × 50,000 kgs. = 30,000 kgs. B = (25 kgs. / 100 kgs) × 50,000 kgs. = 12,500 kgs. C = (20 kgs. / 100 kgs) × 50,000 kgs. = 10,000 kgs. ***Revised Standard Quantity (RSQ): A = (50 kgs. / 110 kgs) × 52,500 kgs. = 23,860 kgs. B = (30 kgs. / 110 kgs) × 52,500 kgs. = 14,320 kgs. C = (30 kgs. / 110 kgs) × 52,500 kgs. = 14,320 kgs. (i) Material Cost Variance = (Std. Qty. × Std. Price) – (Actual Qty. × Actual Price) Or = (SQ × SP) – (AQ × AP) A = 27,50,000 -34,50,000 = 7,00,000 (A) B = 48,00,000 -41,25,000 = 6,75,000 (F) C = 69,00,000 -40,50,000 = 28,50,000 (F) = 28,25,000 (F) (ii) Material Price Variance = Actual Quantity (Std. Price – Actual Price) = (AQ × SP) – (AQ × AP) A = 33,00,000 -34,50,000 = 1,50,000 (A) B = 40,00,000 -41,25,000 = 1,25,000 (A) C = 46,00,000 -40,50,000 = 5,50,000 (F) = 2,75,000 (F) (iii) Material Usage Variance = Std. Price (Std. Qty. – Actual Qty.) Or = (SQ × SP) – (AQ × SP) A = 27,50,000 -33,00,000 = 5,50,000 (A) B = 48,00,000 -40,00,000 = 8,00,000 (F) C = 69,00,000 -46,00,000 = 23,00,000 (F) = 25,50,000 (F) (iv) Material Mix Variance = Std. Price (Revised Std. Qty. – Actual Qty.) Or = (RSQ × SP) – (AQ × SP) A = 26,24,600 -33,00,000 = 6,75,400 (A) B = 45,82,400 -40,00,000 = 5,82,400 (F) C = 65,87,200 -46,00,000 = 19,87,200 (F) = 18,94,200 (F) (v) Material Yield Variance = Std. Price (Std. Qty. – Revised Std. Qty.) Or = (SQ × SP) – (RSQ × SP) A = 27,50,000 -26,24,600 = 1,25,400 (F) B = 48,00,000 -45,82,400 = 2,17,600 (F) C = 69,00,000 -65,87,200 = 3,12,800 (F) = 6,55,800 (F)

Topics: Standard Costing

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