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Answer :
Final answer:
The question asks for the calculation of material variances in chemical production. Variances are calculated by comparing standard and actual cost and usage for each material. The variances for each are summed to find the total variance.
Explanation:
In order to calculate the material variances, you need to recognize the material price variance and the material usage variance. The material price variance refers to the difference between the actual cost of materials and the standard cost of materials. The Material usage variance tells you the cost difference between the actual quantity of material used and the standard quantity expected to be used for production.
To calculate these you use the given values, for example, the price variance for material A, is calculated as follows: (rs.20 - rs.18) x 90kg which gives you a favorable variance because the actual price is less than the standard price. The material price variance for material B would be (rs.34 - rs.30) x 110kg equals rs.440 unfavorable. To get the usage variance, you need to know how much of each material you expected to use. Since there is a 10% loss, you expect to use 182kg/0.9=202.22kg of materials. Given the percentages of each material, you would expect to use 80.89kg of A and 121.33kg of B. Subtract the expected use from the actual use and multiply by the standard price (90kg - 80.89kg) x rs.20 is the usage variance for A. Repeat for B. Add the price and usage variances to get the total variance for each and sum to find the total variance.
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Complete Question:
The standard cost of a chemical mixture is as follows:
40% material A at Rs 20 per kg
60% material B at Rs. 30 per kg
A standard loss of 10% of input is expected in production. The cost recoOrds for a period showed the following usage:
90 kg material A at a cost of Rs 18 per kg
110 kg material B at a cost of Rs 34 per kg
The quality produced was 182 kg of good product.
Calculate
1) Material cost Variance
2) Material Price Variance
3) Material Usage Variance AND
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