Standard Costing – Material Variances - CA Final AMA

Material Variances

Material Cost Variance
Material Cost Variance = Standard Cost – Actual Cost
 Or
Material Cost Variance = [(SQ x SP) – (AQ x AP)]

Material Cost Variance = Material Price variance + Material Usages Variance

Material Price Variance
Material Price Variance = Standard Cost of Actual Quantity – Actual Cost
Or
Material Price variance = [(SP – AP) x AQ]
Or
Material Price Variance = [(SP x AQ) – (AP x AQ)]

Material Usages Variance
Material Usages Variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Quantity
Or
Material Usage Variance = [(SQ – AQ) x SP]
Or
Material Usage Variance = [(SQ x SP) – (AQ x SP)]

Material Usages Variance = Material Mix Variance + Material Yield Variance
Material Mix Variance
Material Mix Variance = Standard Cost of Actual Quantity in Standard Proportion – Standard Cost of Actual Quantity
Or
Material Mix Variance = [(RSQ – AQ)] x SP]
Or
Material Mix Variance = [(RSQ x SP) – (AQ x SP)]

Material Yield Variance  
Material Yield variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Production – Standard Cost of Actual Quantity in Standard Production
Or
Material Yield Variance = [(SQ – RSQ) x SP]
Or
Material Yield Variance = [(SQ x SP) – (RSQ x SP)]

Where,
SQ = Standard Quantity
SP = Standard Price
AQ = Actual Quantity
AP = Actual Price
RSQ = Actual Quantity in Proportion of Standard Quantity

Import Points to be considered in Material Variances
I. Material Price Variance is calculated at point of consumption unless otherwise mentioned in question to be calculated at the point of purchase. In such case Actual Quantity Purchased should be taken.
II. When opening stock is given in question then FIFO method should be used for stock while calculating variance at point of consumption.
III. Opening stock should be taken at standard price unless otherwise mentioned in question.
IV. In Batch Costing Input per Batch is equal for both Standard Quantity and Actual Quantity i.e.  Standard Quantity = Actual Quantity.
V. If there is Work in Progress (WIP) then equivalent quantity of material used should be taken. In case of FIFO method cost for stock should be taken for remaining material to be used.
 

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