EXA Ltd. operates a standard costing system for controlling its material costs and has furnished the following information for the month of April,…

CA Intermediate · Cost and Management Accounting · PYQS · May 2026
EXA Ltd. operates a standard costing system for controlling its material costs and has furnished the following information for the month of April, 2026: Standard Price of raw material 30 per Kg Standard Quantity of material required per unit of output 5 kgs. Standard labour rate 50 per hour Standard labour requirement 2.5 hours per unit Actual Output 2000 units Material Price Variance 1,75,000 (Adverse) Actual Quantity of raw material purchased and consumed 14,000 kgs. Actual wages paid for 6,000 hours 3,24,000 You are required to calculate: (i) Actual price per kg of raw material (ii) Material usage variance (iii) Material cost variance (iv) Labour rate variance (v) Labour efficiency variance (Indicate the nature of variance Favourable (F) or Adverse (A))

Suggested Answer and Working Notes:

(b) Workings: Standard Quantity for actual output = 2,000 x 5 kg = 10,000 kgStandard Labour Hours for actual output = 2,000 x 2.5 hours per unit = 5,000 hoursActual Labour Rate = 3,24,000/6,000 hours = 54 (i) Actual Price Per Kg Material Price Variance = (SP - AP) x AQ Material Price Variance = 1,75,000 (A) Therefore: (30 - AP) x 14,000 = -1,75,000 Actual Price = 42.5 (ii) Material Usage Variance = (SQ - AQ) x SP = (10,000 - 14,000) x 30 = 1,20,000 (A) (iii) Material Cost Variance = SQ x SP - AQ X AP = 10,000 x 30 – 14,000 x 42.5 = 2,95,000 (A) (iv) Labour Rate Variance = (SR - AR) X AH = (₹ 50 -54) x 6000 = 24,000 (A) (v) Labour Efficiency Variance = (SH - AH) X SR = (5,000 – 6,000) x 50 = 50,000 (A)

Topics: Standard Costing

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