Question

Rohit Ltd. budgets to produce 120 units, each using 3 kg material @ Rs. 2 per kg. Actual production is 100 units. Actual material used is 330 kg. @Rs. 2.20 per kg. The material usage variance is :

• A. Rs. 6 (A)
• B. Rs. 40 (F)
• C. Rs. 66 (F)
• D. Rs. 60 (A)

Answer 1

The correct option is D Rs. 60 (A)

Material Usage Variance =(Standard Qty for actual production-Actual Qty)*Standard Rate

Standard Material required to produce actual quantity=100*3= 300 Kgs

Actual Material used=330 Kgs

Standard rate=Rs.2 Per kg.

= (300-330)*Rs.2

=Rs.60 (Adverse)