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QUESTION 5 The Standard material cost of produce one unit of a Cement Company is: 5...

QUESTION 5

  1. The Standard material cost of produce one unit of a Cement Company is:

    5 kg of Material A            @ SR 8 per kg

    8 kg of Material B            @ SR 5 per kg

    During a period, 30 units of mixture X was produced from the usages of:

    160 kg of Material A @ SR 7 per kg

    230 kg of Material A @ SR 4 per kg

    Calculate :  Material Price Variance (MPV)

    A.

    70 (Favorable)
    B.

    160 (Favorable)
    C.

    230 (Favorable)
    D.

    70 (Adverse)
    E.

    None of Above
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Homework Answers

Answer #1

Material Price Variance = (Standard Price - Actual Price) * Actual Quantity

Here Material Price Variance = Material Price Variance of A + Material Price Variance of B

=((8-7) * 160) + ((5-4) * 230)

= 160+230

=390 Favorable

Material Price Variance of A = 160 Favorable

Material Price Variance of B = 230 Favorable

Total Material Price Variance = 390 Favorable

If the question is asked for total Material Price Variance Answer will be E. None of Above

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