Material Price Variance

MA – L2- Q27 – Advanced Variance Analysis

Calculate material price, mix, and yield variances for Product Z at Tamale Industries using standard and actual cost data.

Question

Tamale Industries has the following standard cost for producing 1 unit of Product Z:

Material	Quantity	Price per kilo	Cost
Material M	5 kilos	GH¢8	GH¢40
Material N	3 kilos	GH¢12	GH¢36

Actual results showed that 9,600 kilos of materials were used during a particular period as follows:

Material	Quantity	Cost
Material M	6,700 kilos	GH¢51,400
Material N	2,900 kilos	GH¢39,500

During the period, 1,250 units of Product Z were produced.

Required:
(a) Calculate the following variances:

Direct materials price variance
Materials mix variance
Materials yield variance
(b) Summarize the standard materials cost, materials price variance, materials mix variance, materials yield variance, and actual materials cost.

Answer

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Tags: Cost Control, Material Mix Variance, Material Price Variance, Material Yield Variance, Standard Costing, Variance analysis
Level: Level 2

Topic: Advanced Variance Analysis

MA – L2 – Q26 – Standard Costing and Variance Analysis

Calculate standard cost sheet for Product AB using given actual costs and variances to determine standard costs and rates.

Question

Standard marginal production cost – Product AB


Direct materials	(8 kilos at GH¢1.50 per kilo)
Direct labour	(2 hours at GH¢4 per hour)
Variable production overhead	(2 hours at GH¢1 per hour)
Standard marginal production cost

Tutorial note: This problem tests your understanding of the formulae for calculating variances. Here, you are given the actual costs and the variances, and have to work back to calculate the standard cost. The answer can be found by filling in the balancing figures for each variance calculation.

Workings
Materials price variance
150,000 kilos of materials did cost
Material price variance
150,000 kilos of materials should cost
(The variance is favourable, so the materials did cost less to buy than they should have cost.)

Materials usage variance
Materials usage variance in GH¢ = GH¢9,000 (A)
Standard price for materials = GH¢1.50
Materials usage variance in kilograms = 9,000 / 1.50 = 6,000 kilos (A) kilos
18,000 units of the product did use
Material usage variance in kilos
18,000 units of the product should use

Required:
Calculate the standard cost sheet for Product AB, including:

Standard price for materials.
Standard quantity of materials per unit.
Standard time per unit for labour.
Variable production overhead rate per hour.

Answer

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Tags: Labour variance, Marginal Costing, Material Price Variance, Material Usage Variance, Overhead variance, Standard Costing, Variance analysis
Level: Level 2

Topic: Standard costing and variance analysis

MA – L2 – Q25 – Advanced variance analysis

Calculate actual quantity purchased and cost of materials X and Y, including variances, for VRS Limited.

Question

VRS Limited has the following data for a particular period:

Standard consumption quantities:

Material X: 50,000 units × 6 kg = 300,000 kg
Material Y: 50,000 units × 3 kg = 150,000 kg

Adverse quantity variance (quantity used in excess of standard usage):

Material X: 5,000 kg
Material Y: 5,000 kg

Actual quantity used:

Material X: 300,000 kg + 5,000 kg = 305,000 kg
Material Y: 150,000 kg + 5,000 kg = 155,000 kg

Inventory data:

Closing inventory:
- Material X: 300,000 kg × 20/365 = 16,438 kg
- Material Y: 150,000 kg × 20/365 = 8,219 kg
Opening inventory:
- Material X: 300,000 kg × 25/365 = 20,548 kg
- Material Y: 150,000 kg × 25/365 = 10,274 kg

Actual cost data:

Material X: GH₵150,000 ÷ GH₵30 = 5,000 kg (used to calculate actual quantity used)
Standard cost per kilo:
- Material X: GH₵50
- Material Y: GH₵30

Required:
(a) Calculate:

Actual quantity purchased for Materials X and Y.
Actual cost of purchase for Materials X and Y, including price variance and percentage saved on standard rate.
VRS Limited has the following data for a particular period:

Labour rate variance data:
- Actual hours: 168,000
- Standard rates:
  - 3/7 of hours at GH₵150 per hour
  - 4/7 of hours at GH₵100 per hour
- Rate variance: 10% and 5% (Adverse)
Required:
(b) Calculate the labour rate variance and any relevant overhead variances.

Answer

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Tags: Cost analysis, Inventory Valuation, Material Price Variance, Material Usage Variance, Standard Costing
Level: Level 2

Topic: Advanced Variance Analysis

MA – L2 – Q23 – Advanced Variance Analysis

Calculate total materials cost variance for Tamale Chemicals and analyze into price, usage, yield, and mix components for GreenLube production.

Question

Tamale Chemicals, based in Tamale, has the following standard cost for producing 9 litres of GreenLube:

5 litres of Material X at GH₵0.70 per litre
5 litres of Material Y at GH₵0.92 per litre.

There are no inventories of materials, and all material price variances relate to materials used. Actual results showed that 100,000 litres of materials were used during a particular period as follows:

45,000 litres of Material X: cost GH₵36,000
55,000 litres of Material Y: cost GH₵53,350

During the period, 92,070 litres of GreenLube were produced.

Required:
Calculate the total materials cost variance and analyse it into its price, usage, yield, and mix components.

Answer

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Topic: Advanced Variance Analysis

Tag (SQ): Material Price Variance

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MA – L2- Q27 – Advanced Variance Analysis

Calculate material price, mix, and yield variances for Product Z at Tamale Industries using standard and actual cost data.

MA – L2 – Q26 – Standard Costing and Variance Analysis

Calculate standard cost sheet for Product AB using given actual costs and variances to determine standard costs and rates.

MA – L2 – Q25 – Advanced variance analysis

Calculate actual quantity purchased and cost of materials X and Y, including variances, for VRS Limited.

MA – L2 – Q23 – Advanced Variance Analysis

Calculate total materials cost variance for Tamale Chemicals and analyze into price, usage, yield, and mix components for GreenLube production.

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MA – L2- Q27 – Advanced Variance Analysis

Calculate material price, mix, and yield variances for Product Z at Tamale Industries using standard and actual cost data.

You're reporting an error for "MA – L2- Q27 – Advanced Variance Analysis"

MA – L2 – Q26 – Standard Costing and Variance Analysis

Calculate standard cost sheet for Product AB using given actual costs and variances to determine standard costs and rates.

You're reporting an error for "MA – L2 – Q26 – Standard Costing and Variance Analysis"

MA – L2 – Q25 – Advanced variance analysis

Calculate actual quantity purchased and cost of materials X and Y, including variances, for VRS Limited.

You're reporting an error for "MA – L2 – Q25 – Advanced variance analysis"

MA – L2 – Q23 – Advanced Variance Analysis

Calculate total materials cost variance for Tamale Chemicals and analyze into price, usage, yield, and mix components for GreenLube production.

You're reporting an error for "MA – L2 – Q23 – Advanced Variance Analysis"

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