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

Costing ( Revenue Account ) Basics of Cost Control and Analysis

Standards for material cost per unit of finished product 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 Usage Variance is:

Rs. 30,000 (A)

Rs. 30,000 (F)

Rs. 40,000 (A)

Rs. 40,000 (F)

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Explanation:

- Material Usage Variance (MUV) measures the cost impact of the difference between the actual quantity of material used and the standard quantity expected for production.

- Standard Quantity required is 10 units per finished product. So, for 7,000 finished products, 70,000 units of material are expected.

- Actual Material Used is 75,000 units.

- Variance Calculation:

- Difference: 75,000 units (actual) - 70,000 units (standard) = 5,000 units.

- Cost of Excess Usage: 5,000 units * Rs. 6 (standard cost per unit) = Rs. 30,000.

- Negative Variance (A), indicates more material was used than planned, which is adverse.

Correct Answer: Option 1, Rs. 30,000 (A)