Question

    A company has a standard direct material cost of ₹10

    per unit. Actual cost incurred was ₹12 per unit for 1,000 units. 950 units were actually produced. What is the Material Cost Variance?
    A ₹2,000 (Adverse) Correct Answer Incorrect Answer
    B ₹500 (Favourable) Correct Answer Incorrect Answer
    C ₹2,500 (Adverse) Correct Answer Incorrect Answer
    D ₹1,000 (Adverse) Correct Answer Incorrect Answer

    Solution

    Material Cost Variance (MCV) = (Standard Price × Standard Quantity) – (Actual Price × Actual Quantity) ________________________________________ Given: • Standard cost per unit = ₹10 • Actual cost per unit = ₹12 • Actual quantity of material used = 1,000 units • Actual output produced = 950 units Assume 1 unit of output requires 1 unit of material (standard quantity = 950 units for 950 units output). ________________________________________ Step-by-step calculation: •Standard Cost = ₹10 × 950 units = ₹9,500 •Actual Cost = ₹12 × 1,000 units = ₹12,000 ________________________________________ Material Cost Variance (MCV): MCV=₹9,500−₹12,000=−₹2,500

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