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Standard costing doubt

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)

16 December 2012

Hello frns, I need little help regarding std costing -

calculate Material price variance n usage variance

Std qty :- 18,000

SR - 10

on analysis it was found that out of 25,000 kgs , 5,000kgs were purchased in emergancy order @ 20 kg

Actual qty Actual price

20,000 12/kg

5000 20/kg

I am unable to derive the answer provided in the book. the question is from Sanjay Aggarwal's book and it's 1st question.

will be waiting for replies with logics

Regards

Renu

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14 Replies

sidhant saha (prop) (1394 Points)
Replied 16 December 2012

material price variance-this is the difference in cost that results from price being different to standard. it is therefore the difference in price multiplied by actual usage.the formula is price difference *actual quantity. or (standard price-actual price)*actual quantity. or standard price * actual quantity-actual price *actual quantity.or standard cost of actual quantity -actual cost. therefore mpv= 10-12*20000=40000(A) material usage variance-the material usage variance is the difference between actual usage and expected usage (i.e.what should have been used to produce the actual output ) multiplied by the standard price .the formula is usage difference * standard price or (standard usage-actual usage)*standard price or( standard usage*standard price) - ( actual usage*standard price ) or standard cost of standard quantity -standard cost of actual quantity.therefore(18000*10)-(20000*10 )=180000-20000=20000(A)

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Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

PRICE VARIANCE = (SP-AP)AQ OR SP*AQ -AP*AQ

= 10*18000 - {(12*20000)+(20*5000)}

= 180000-(240000+100000)

= 180000-340000 = 160000 (A)

USAGE VARIANCE = (SQ-AQ)SP

= (18000-25000)10

= 7000*10 =70000 (A)

COST VARIANCE = 160000+70000=230000 (A)

IF DIFFERENT PLEASE FEEL FREE TO ASK.................

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 16 December 2012

@ sidhant ...

I didn't understand why you haven't taken 5000 kg in consideration as well ....

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 16 December 2012

@ Rajnikant Sir

You hav already calculated the material cost variance in price variance.

the actual answers are :-

Material price variance :- 110,000 (A)

Usage variance :- 50,000 (A)

MCV is 160000 (A) which is correct but I am unable to cal price n usage variance .

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

DEAR RENU,

IS THERE ANY DIFFERENCE IN OUTPUT CAN U GIVE ME MORE DETAILS...............

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*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 16 December 2012

@ rajnikant Sir

I have pasted the whole question. There are no further details in the question.

I was thinking that there should be some different treatment for emergancy purchase, thats y my answer is not matching with the book.

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

YES U R RIGHT I ASSUME SAME I'LL COME TO U SOON..........

1 Like

Deepak Gupta (CA Student) (15922 Points)
Replied 16 December 2012

Solution:

Material Price Variance = (S.P. – A.P.) × A.S.

= (10 – 12)×20,000 + (10 – 12)×5,000

=50,000 Adverse

Material Usage Variance = Excess price variance + (S.Q. – A.Q.)×S.P.

due to emergency order

= (12 – 20)×5,000 + (18,000 – 25,000)×10

=1,10,000
.
Note: Solution copy pasted from

(https://www.scribd.com/doc/109714785/38-Standard-Costing)

3 Like

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 16 December 2012

YES I AGREE WITH DEEPAK....

Deepak Dargad (Chartered Accountant....) (9787 Points)
Replied 16 December 2012

Originally posted by : \|)eep @ k Gupt/\
	Solution: Material Price Variance = (S.P. – A.P.) × A.S. = (10 – 12)×20,000 + (10 – 12)×5,000 =50,000 Adverse Material Usage Variance = Excess price variance + (S.Q. – A.Q.)×S.P. due to emergency order = (12 – 20)×5,000 + (18,000 – 25,000)×10 =1,10,000 . Note: Solution copy pasted from (https://www.scribd.com/doc/109714785/38-Standard-Costing)