material
## 28. Material Cost , Material Price & Material Usage Variance - Problem With Solution

hello dear students welcome to device

commerce and management academy so we

are into

material standard standard costing and

variance analysis

in the beginning classes i gave you

introduction of standard costing

and second class we have seen material

variances

different types of material variances

chart twice i have given you

now today we'll see material variances

total five types of material variants

are there okay right now so we'll see

today three

three variances material variances

very easy to remember just focus today's

class

then you can grasp it

so

material variances mainly you know that

material cost variance is the main one

right so that is divided into two parts

as i told you material cost variance is

the first one that's divided in two

parts one is material price variance and

material usage variance

through a table i have shown you these

three main important we'll see today

these three will cover it in one class

only

material cost variance material price

variance material usage variance

remember this the formulas are important

material cost variance it depends on the

standard variance and actual

like the formula if you see material

cost variance

sp standard price into standard quantity

sv means standard price sq means

standard quantity

ap actual price aq actual quantity

s means standard a means actual p is

price q is quantity

you must remember this okay and the

formula is s p into sq standard price

into standard quantity both you are

multiplying

that is deducted from actual price and

actual quantity

easy to remember now the formula

material cost variance this material

cost variance is divided into two parts

one is material price material usage now

material price variance how do we get it

so for this material price variance is

equal to actual quantity

actual quantity into standard price

minus standard price actual price this

is price variance now

so the difference of price we are taking

that is multiplied with actual quantity

actual quantity into standard price

minus actual price easy to remember

and next material usage variance as per

the usage of that

so how do we determine this material

usage variance muv is equal to standard

price

into sq minus

aq quantity in a usage

usage means we are taking the difference

of standard quantity and

actual quantity here price

price means standard price minus

standard

uh standard price minus actual price

right here actual quantity we have taken

here standard

price we have taken that's it these

three formulas you have to buy heart

just like tables in school life

now if you work out these three how do

you verify it remember only one thing

mcv is equal to mpv plus mub

see

mcb is equal to

mpv

plus muv easy to remember

and see material cost variance is equal

to material price variance plus material

usage variance

right

understanding it

now today we'll work out one problem

simple problem i have taken so that

you can

able to work out you'll get the

confidence also now see the problem this

is the problem

a company has the following data what is

the data they are having

as per the data calculate material

variances material variances we know

that we are discussing only these three

these three material variances we are

going to

calculate

not the material yield variance okay

material that we will see later

material variance means material price

variance material cost variance material

usage vary in these three we are going

to calculate

now data is given standard quantity

specified for production is 800 kgs

means standard quantity

standard quantity sq

800 kgs at the rate of eight rupees per

kg means standard price is

eight rupees

standard quantity 800 kgs standard price

is eight rupees

in the same way actual quantity used for

production is

700 kgs actual quantity means aq

this is aq

and actual price is 10 rupees

actual price

given to us standard quantity standard

price

okay

now actual quantity actual price both

are given we have to calculate the three

variances material price material cost

and material usage we know the formulas

right so first we'll calculate the first

one material cost variance

you have to write it in full form

or otherwise i'll write material

cost variance

formula

formula of the fame same formula you

have to write the next step is standard

price standard price is here eight

rupees standard price into standard

quantity 800 kgs

minus

actual price actual price is

10 rupees

actual quantity is 700

if you multiply you'll get

material cost variance in the same the

second one

material price variance

material price variance

what is the formula for material price

variance actual quantity actual quantity

is here 700

700 into standard price minus actual

price standard price is 8 rupees

actual price is 10 rupees

if we do the multiplication will get

total material price variance in the

same way third one third one is material

usage variance

what is the formula standard price into

standard quantity minus actual quantity

standard price is here eight rupees

standard quantity minus actual quantity

standard quantity is 800

actual quantity is seven hundred

now we will do the calculations

eight hundred into eight hundred eight

hundred into eight

it is six thousand four hundred okay

minus seven thousand

means six hundred six hundred we are

getting answer

right

600 you are getting and next one is that

8 minus 10

it comes to minus 2 minus 2 into 400

1400

this is minus 1400

we need not to say minus 1400

but this is you can say it as a

unfavorable

whatever this one this one is also minus

means it is unfavorable

means whatever we have expected standard

price that we could not reach it that is

unfavorable both are unfavorable now let

us see let us material usage and this is

800 minus 100 now this is 100 into 8

800

yeah

800 this you are getting

favorable

like this you got both three

now if you want to check verification

mcv is equal to mpv plus muv mcv is here

and 600 unfavorable

you can write it as a verification

mcv is equal to

mpv plus muv

mcv is here

600 unfavorable

mpv is 400 unfavorable

plus 800 favorable

unfavorable means ma minus value okay so

1400 minus 800 comes to 600 only

so 600 600

both are unfavorable

answer is

both the side 600 we are getting both

are unfavorable

it means

what we have done it is correct like

this you can check it out

am i clear first you take the screenshot

or not done then i'll give you recap

clearness this is today's class nothing

to worry only three variances we have

learned three are important

related to the material one is material

cost material price material usage

formulas you remember it

and verification

now the problem what we have taken is

simple problem

data is everything given standard

quantity standard price and actual

quantity actual price it is everything

is given we just have implemented in the

formula

answers please remember unfavorable

unfavorable favorable you got it if you

verify it

it is styling both sides it's equal

means the problem is correct like this

that's all simple in the coming classes

we'll see more by the way don't forget

to share this videos stay in touch good

luck

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