Question
Vanijya Ltd cost department stated that the standard
direct material cost for it is ₹10 0 per unit. The a ctual cost incurred , however, was ₹12 0 per unit for 10 ,0 00 units. If Vanijya Ltd produced 9 , 50 0 units , w hat is its Material Cost Variance?Solution
Solution:
Material Cost Variance is the difference between the standard cost of direct materials specified for production and the actual cost of direct material used in production. It is given as: (MCV) = (Standard Price × Standard Quantity) – (Actual Price × Actual Quantity) 
Given:
- Standard cost per unit = ₹10 0
- Actual cost per unit = ₹12 0
- Actual quantity of material used = 10 ,0 00 units
- Actual output produced = 9 , 5 0 0 units
Step-by-step calculation: - Standard Cost = ₹10 0 × 950 0 units = ₹9 , 50 ,0 0 0
- Actual Cost = ₹12 0 × 10 ,0 00 units = ₹12, 00, 000
Material Cost Variance (MCV): MCV = ₹9,50 ,00 0 − ₹12,0 0,0 00 = − ₹2,500 , 00 i.e. adverse
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