Standard 5 kg at ₹4 per kg per unit. Actual 4,800 units used 25,200 kg at ₹4.20 per kg. Material cost variance is:
A₹9,840 favourable
B₹9,840 adverse
C₹10,080 adverse
D₹5,040 adverse
Answer & Solution
Correct answer: B. ₹9,840 adverse
1. Standard cost = SQ × SP per output unit × output units = 5 × 4 × 4,800 = ₹96,000.
2. Actual cost = AQ × AP = 25,200 × 4.20 = ₹1,05,840.
3. Material cost variance = Standard − Actual = 96,000 − 1,05,840 = −9,840.
4. The negative result indicates adverse variance of ₹9,840.
_Source: ICAI BoS Inter Paper 3, Ch 13 "Standard Costing", §13.5.1 Illus 5_
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