Simple Problem on Material Variances involving two materials

S3 ↞ P2

Problem 3

From the data give below, calculate materials variances.

Consumption for 120 units of production
Raw Materials Standard Actual
A
B 		65 units @ 50 per unit
35 units @ 40 per unit 		80 units @ 50 per unit
40 units @ 44 per unit
Ans:
A B Total
MYV/MSUV
MMV 		− 650
− 100 		− 280
+ 80 		− 930
− 20
MQV/MUV
MPV 		− 750
0		 − 200
− 160		 − 950
− 160
MCV − 750 − 360 − 1,110

Working Notes

The following data could be picked up from the problem

Standard Actual
SQ SP AQ AP
Raw Material A
Raw Material B 		65
35 		50
40 		80
40 		50
45
Output 120 120

units : _Q in units, _P in value/unit and _O in units

Working Table

Working table incorporating the data in the problem and the calculated values including recalculated standards
Working Table with recalculated standards
Standard Actual
for SO for AO for AI
SQ SP SQ(AO) SC(AO) SQ(AI) SC(AI) AQ AP AC SC(AQ)
Factor 1 1.2
Raw Material A
Raw Material B 		65
35 		50
40 		65
35 		3,250
1,400 		78
42 		3,900
1,680 		80
40 		50
44 		4,000
1,760 		4,000
1,600
Total/Mix 100 100 4,650 120 5,580 120 5,760 5,600
Output 120
SO 		120
SO(AO) 		144
SO(AI) 		120
AO

Output (_O) is in units, Quantities (_Q) and Losses (_L) are in units, Prices (_P) are in monetary value per unit and Costs (_C) are in monetary values.

Standard Output

SO = 120 unit (given)

Actual Output

AO = 120 unit (given)
(AO) =
AO
SO
=
120
120
= 1
(AI) =
AI
SI
=
AQMix
SQMix
=
120
100
= 1.2
1. SQ(AO) = SQ ×
AO
SO
= SQ × 1

2. SC(AO) = SQ(AO) × SP

3. SO(AO) = AO

4. SQ(AI) = SQ ×
AI
SI
= SQ × 1.2

5. SC(AI) = SQ(AI) × SP

6. SO(AI) = SO ×
AI
SI

7. SC(AQ) = AQ × SP

Solution

Material Cost Variance

MCV = SC(AO) − AC

Material Cost Variance due to

Raw Material A,
MCVA = SC(AO)A − ACA
= 3,250 − 4,000 = − 750 [Adv]
Raw Material B,
MCVB = SC(AO)B − ACB
= 1,400 − 1,760 = − 360 [Adv]
TMCV or MCVMix = − 1,110 [Adv]
Material Mix,
MCVMix = SC(AO)Mix − ACMix
= 4,650 − 5,760 = − 1,110 [Adv]

Material Price Variance

MPV = SC(AQ) − AC

Material Price Variance due to

Raw Material A,
MPVA = SC(AQ)A − ACA
= 4,000 − 4,000 = 0
Raw Material B,
MPVB = SC(AQ)B − ACB
= 1,600 − 1,760 = − 160 [Adv]
TMPV or MPVMix = − 160 [Adv]
Material Mix,
MPVMix = SC(AQ)Mix − ACMix
= 5,600 − 5,760 = − 160 [Adv]

Material Quantity/Usage Variance

MQV/MUV = SC(AO) − SC(AQ)

Material Quantity/Usage Variance due to

Raw Material A,
MQV/MUVA = SC(AO)A − SC(AQ)A
= 3,250 − 4,000 = − 750 [Adv]
Raw Material B,
MQV/MUVB = SC(AO)B − SC(AQ)B
= 1,400 − 1,600 = − 200 [Adv]
TMQV/MUV or MQV/MUVMix = − 950 [Adv]
Material Mix,
MQV/MUVMix = SC(AO)Mix − SC(AQ)Mix
= 4,650 − 5,600 = − 950 [Adv]

Material Mix Variance

MMV = SC(AI) − SC(AQ)

Material Mix Variance due to

Raw Material A,
MMVA = SC(AI)A − SC(AQ)A
= 3,900 − 4,000 = − 100 [Adv]
Raw Material B,
MMVB = SC(AI)B − SC(AQ)B
= 1,680 − 1,600 = + 80 [Fav]
TMMV or MMVMix = − 20 [Adv]
Material Mix,
MMVMix = SC(AI)Mix − SC(AQ)Mix
= 5,580 − 5,600 = − 20 [Adv]

Material Yield/Sub-Usage Variance

MYV/MSUV = SC(AO) − SC(AI)

Material Yield/Sub-Usage Variance due to

Raw Material A,
MYV/MSUVA = SC(AO)A − SC(AI)A
= 3,250 − 3,900 = − 650 [Adv]
Raw Material B,
MYV/MSUVB = SC(AO)B − SC(AI)B
= 1,400 − 1,680 = − 280 [Adv]
TMYV/MSUV or MYV/MSUVMix = − 930 [Adv]
Material Mix,
MYV/MSUVMix = SC(AO)Mix − SC(AI)Mix
= 4,650 − 5,580 = − 930 [Adv]

Solution (minimal detail)

Material Cost Variance

MCV = SC(AO) − AC

Raw Material A,
Raw Material B, 		3,250 − 4,000
1,400 − 1,760 		=
= 		− 750 [Adv]
− 360 [Adv]
Mix/Total, 4,650 − 5,760 = − 1,110 [Adv]

Material Price Variance

MPV = SC(AQ) − AC

Raw Material A,
Raw Material B, 		4,000 − 4,000
1,600 − 1,760 		=
= 		0
− 160 [Adv]
Mix/Total, 5,600 − 5,760 = − 160 [Adv]

Material Quantity/Usage Variance

MQV/MUV = SC(AO) − SC(AQ)

Raw Material A,
Raw Material B, 		3,250 − 4,000
1,400 − 1,600 		=
= 		− 750 [Adv]
− 200 [Adv]
Mix/Total, 4,650 − 5,600 = − 950 [Adv]

Material Mix Variance

MMV = SC(AI) − SC(AQ)

Raw Material A,
Raw Material B, 		3,900 − 4,000
1,680 − 1,600 		=
= 		− 100 [Adv]
+ 80 [Fav]
Mix/Total, 5,580 − 5,600 = − 20 [Adv]

Material Yield/Sub-Usage Variance

MYV/MSUV = SC(AO) − SC(AI)

Raw Material A,
Raw Material B, 		3,250 − 3,900
1,400 − 1,680 		=
= 		− 650 [Adv]
− 280 [Adv]
Mix/Total, 4,650 − 5,580 = − 930 [Adv]

Solution (alternative presentation)

Raw Material A Raw Material B Mix/Total
MYV/MSUV

Raw Material A
Raw Material B
Mix
SC(AO)
3,250
1,400
4,650
−
−
−
−
SC(AI)
3,900
1,680
5,580
+ MMV

Raw Material A
Raw Material B
Mix
SC(AI)
3,900
1,680
5,580
−
−
−
−
SC(AQ)
4,000
1,600
5,600


− 650




− 100


− 280




+ 80



− 930




− 20
MQV/MUV

Raw Material A
Raw Material B
Mix
SC(AO)
3,250
1,400
4,650
−
−
−
−
SC(AQ)
4,000
1,600
5,600
+ MPV

Raw Material A
Raw Material B
Mix
SC(AQ)
4,000
1,600
5,600
−
−
−
−
AC
4,000
1,760
5,760


− 750




0


− 200




− 160



− 950




− 160
MCV

Raw Material A
Raw Material B
Mix
SC(AO)
3,250
1,400
4,650
−
−
−
−
AC
4,000
1,760
5,760


− 750


− 360



− 1,110

Verification

If adopting the first and second presentation methods, it would help building the following table to enable us to verify whether our workings are correct or not.

Verification

Formula Raw Material A Raw Material B Mix/Total
MYV/MSUV
+ MMV 		SC(AO) − SC(AI)
SC(AI) − SC(AQ) 		− 650
− 100 		− 280
+ 80 		− 930
− 20
MQV/MUV
+ MPV 		SC(AO) − SC(AQ)
SC(AQ) − AC 		− 750
0 		− 200
− 160 		− 950
− 160
MCV SC(AO) − AC − 750 − 360 − 1,110

Simplest

One may use this as the simplest presentation of calculations, since all the amounts used in the formula are present in the working table.

If it is for verification purposes, we may avoid the formula column.

Please adopt a presentation based on the examination you are attending, the proportion of marks allotted and time available to/for the problem.

Author : The Edifier
S3 ↠ P4