Multiple Choice Questions on Standards for material cost per unit of finished products in a factory are as given 10 units Rs 6 pe........... for Punjab Government (Allied) Exams Preparation

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Multiple Choice Questions

Standards for material cost per unit of finished products in a factory are as given 10 units Rs 6 pe...........

Costing ( Revenue Account ) Basics of Cost Control and Analysis
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    Standards for material cost per unit of finished products in a factory are as given: 10 units @ Rs. 6 per unit. 7000 units of finished product were made during the period and 75000 units of material were used at a cost of Rs. 8 per unit. The Material Price Variance is:

    Rs. 1,40,000 (A)

    Incorrect Answer

    Rs. 1,50,000 (A)

    Correct Answer

    Rs. 1,50,000 (F)

    Incorrect Answer

    Rs. 1,40,000 (F)

    Incorrect Answer
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    Explanation:

    - Standard Material Cost per Unit: 10 units @ Rs. 6 = Rs. 60 per finished product.

    - Standard Material Cost for 7,000 Units: 7,000 x Rs. 60 = Rs. 4,20,000.

    - Actual Material Used: 75,000 units at Rs. 8 per unit = Rs. 6,00,000.

    Material Price Variance (MPV):

    - Formula: (Standard Price - Actual Price) x Actual Quantity Used.

    - Calculation: (Rs. 6 - Rs. 8) x 75,000 = Rs. -1,50,000.

    - A negative variance shows an adverse variance (A), meaning more was spent than planned.

    Correct Answer: Option 2 - Rs. 1,50,000 (A)

    By: Rohit Middha
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