Standard price ₹10, actual price ₹12, actual quantity 1,000. Material price variance is:
A₹1,000 adverse
B₹2,000 favourable
C₹2,000 adverse
D₹500 favourable
Answer & Solution
Correct answer: C. ₹2,000 adverse
1. Material price variance formula: (Standard price − Actual price) × Actual quantity.
2. Substitute: (10 − 12) × 1,000 = −2 × 1,000 = −2,000.
3. The negative figure means actual price exceeded standard, so the variance is adverse.
4. Hence the variance is ₹2,000 adverse.
_Source: ICAI BoS Inter Paper 3, Ch 13 "Standard Costing", §13.5.1 Illus 3_
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