The Standard Cost of Chemical mixture ‘PQ’ is as follows:40% of material P @ Rs.400 per kg. 60% of material Q @ Rs.600 per kg.A standard loss of 10% is normally anticipated in production.The following particulars are available for the month of March, 2004.180 kgs of material P have been used @ Rs.680 per kg220 kgs of material Q have been used @ Rs.360 per kg.The actual of production of ‘PQ’ was 369 kgs.Calculate the following variances:a) Material Price Varianceb) Material Usage Variancec) Material Mix Varianced) Material Yield Variance

To calculate the variances, we first need to calculate the standard cost of producing 1 kg of PQ.

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Standard cost of 1 kg of PQ = (0.4 * 400) + (0.6 * 600) = Rs. 520
Standard loss = 10%

Therefore, the standard cost of 1 kg of PQ after accounting for standard loss = (Rs. 520 / (100% – 10%)) = Rs. 577.78 per kg.

a) Material Price Variance:
Actual cost of 180 kg of material P = 180 * Rs. 680 = Rs. 1,22,400
Actual cost of 220 kg of material Q = 220 * Rs. 360 = Rs. 79,200

Total actual cost of materials = Rs. 1,22,400 + Rs. 79,200 = Rs. 2,01,600

Standard cost of 180 kg of material P = 180 * Rs. 400 = Rs. 72,000
Standard cost of 220 kg of material Q = 220 * Rs. 600 = Rs. 1,32,000

Total standard cost of materials = Rs. 72,000 + Rs. 1,32,000 = Rs. 2,04,000

Material price variance = Actual cost of materials – Standard cost of materials
= Rs. 2,01,600 – Rs. 2,04,000
= Rs. (2,400) adverse

b) Material Usage Variance:
Standard quantity of material P required = 0.4 * 369 = 147.6 kg
Standard quantity of material Q required = 0.6 * 369 = 221.4 kg

Material usage variance = (Actual quantity of materials used – Standard quantity of materials allowed) * Standard cost per kg
= [(180-147.6) * 400] + [(220-221.4) * 600]
= Rs. (7,200) favourable

c) Material Mix Variance:
Standard quantity of material P required = 0.4 * 369 = 147.6 kg
Standard quantity of material Q required = 0.6 * 369 = 221.4 kg

Mix variance = (Actual quantity of PQ produced – (Standard quantity of P and Standard quantity of Q for actual output))* Standard cost per kg of PQ
= (369 – (147.6 + 221.4)) * Rs. 520
= Rs. (9,360) adverse

d) Material Yield Variance:
Standard quantity of PQ that should have been produced = 369 / (100% – 10%) = 410 kg (after accounting for standard loss of 10%)

Yield variance = (Actual quantity of PQ produced – Standard quantity of PQ that should have been produced) * Standard cost per kg of PQ
= (369 – 410) * Rs. 577.78
= Rs. (23,074) adverse

Therefore, the variances are:
a) Material price variance = Rs. (2,400) adverse
b) Material usage variance = Rs. 7,200 favourable
c) Material mix variance = Rs. (9,360) adverse
d) Material yield variance = Rs. (23,074) adverse.