INDEX

Section
Group Member Details
About the Company
Material Variance Concepts
2020
2021
2022
2023
2024
Conclusion/Trends
 GROUP
Name
Ayush Patil
Chaitrali Khoche
Farhan Lokhandwala
Jaivir Chopra
Janhavi Khanwalkar
 GROUP MEMBERS
Roll No.
11
12
13
14
15
S
Year Taken for Analysis
2020
2021
2022
2023
2024
 Basic Company
Company Name
Industry
Year of Establishment
Head Office
Number of Employees
Annual Turnover
Type of Company
Product Portfolio
Market Presence

Brief Description of Operations

AstroTech Industries Pvt. Ltd. is a leading manufacturer in the Indian

consumer durables space, specializing in smart and durable plastic-
based utility products. With operations spanning over 17 years, the
company has developed a wide range of home and kitchen solutions
designed to meet the evolving needs of urban Indian households. The
company operates a semi-automated manufacturing unit in Chakan
(Pune), which integrates skilled manual labour with automated systems
to maintain both flexibility and cost-efficiency. Its customer base
includes major retail chains, online marketplaces, and export clients.
AstroTech’s emphasis on cost control, quality, and innovation makes it
a relevant and insightful case for cost accounting and variance analysis.

Why We Chose AstroTech Industries for This Project

The company provides a realistic setting to apply standard costing
principles, particularly in the areas of material procurement, labour
utilization, and efficiency tracking. Since AstroTech deals with high-
volume, low-margin products, controlling material and labour variances
is critical for its profitability. With measurable inputs (raw plastic
pellets, packaging materials) and direct labour hours, the company's
structure is well-aligned for a detailed analysis of variances such as
Material Price Variance, Usage Variance, Labour Rate Variance, and
Efficiency Variance. It allows us to simulate realistic business decisions
while applying accounting principles practically.
Company Details
AstroTech Industries Pvt. Ltd.
Consumer Durables / Light Engineering Manufacturing
2006
Pune, Maharashtra
Approx. 1,500
₹725 Crore (FY 2023–24)
Private Limited Company
Plastic storage containers, modular kitchen units, smart utility cabinets
PAN India distribution with export ties in Southeast Asia and Gulf region
Standard costing is a cost control technique where pre-
set (standard) costs are compared with actual costs. The
difference is called a variance, which helps identify
whether operations were efficient or costly. Variances
can be favorable (good) or adverse (bad), and are used
for managerial decision-making.

Variance Type
MATERIAL VARIANCES

Material Cost Variance (MCV)

Material Price Variance (MPV)

Material Usage Variance (MUV)

Material Mix Variance (MMV)

Material Yield Variance (MYV)

LABOUR VARIANCES

Labour Cost Variance (LCV)

Labour Rate Variance (LRV)

Labour Efficiency Variance (LEV)

Labour Mix Variance (LMV)

Labour Yield Variance (LYV)

📌 Legend:
SP = Standard Price
AP = Actual Price
SQ = Standard Quantity
AQ = Actual Quantity
RSQ = Revised Standard Quantity (for actual output)
SR = Standard Rate
AR = Actual Rate
SH = Standard Hours
AH = Actual Hours
RSH = Revised Standard Hours (for actual output)
 que where pre- Why Variance Analysis is Important”
actual costs. The
ps identify Helps management control costs
stly. Variances Identifies inefficiencies in production or procurement
d), and are used Aids in budgeting and forecasting
Useful for incentive/bonus decisions
Improves accountability at departmental level

Formula Meaning
MATERIAL VARIANCES
Shows the overall cost difference between what
was expected to be spent on materials and
(SP × SQ) − (AP × AQ) what was actually spent. It helps assess
whether the material costs are being
controlled.

Measures how much of the variance is due to a

change in the price of raw materials. A
AQ × (SP − AP)
favorable variance means materials were
purchased at a cheaper price than expected.

Indicates if more or less quantity of materials

was used compared to the standard. An
SP × (SQ − AQ)
adverse variance may show wastage or
inefficiency in usage.

Tells us the effect of using a different

proportion of materials than originally planned.
SP × (RSQ − AQ)
Useful when multiple materials are combined in
a standard mix.

Measures how efficiently input material is

turned into finished goods. Adverse yield may
SP × (SQ − RSQ)
mean process inefficiencies, defects, or quality
issues.

LABOUR VARIANCES
Indicates whether the total labour cost is higher
(SH × SR) − (AH × AR) or lower than expected. It includes both wage
rates and hours worked.

Compares standard labour rates to actual rates

paid. An adverse variance suggests higher
AH × (SR − AR)
wages were paid, perhaps due to overtime or
skilled labour.
 Measures whether the labour team was
SR × (SH − AH) efficient in using time. A favorable result shows
tasks were completed faster than expected.

Shows the effect of changing the mix of skilled

SR × (RSH − AH) and unskilled workers. A better mix improves
efficiency and costs.

Measures whether the actual output received

from the hours worked is in line with the
SR × (SH − RSH)
expected yield. It identifies performance gaps in
productivity.
 Type Interpretation

Actual cost is less than

Favorable (F) standard = Good for the
company

Actual cost is more than

Adverse (A) standard = Bad for the
company
 Year Material Standard Qty

2020 A 25
2020 B 15

RM STANDARD O
Quantity Rate
A 30 22
B 18 12
INPUT 48

MATERIAL VARIANCE FORMULAE MATERIAL

Material Price Variance MPV = AQ × (SR - AR) A

B
Material Cost Variance MCV = (SR × SQ) - (AR × AQ) Standard
Actual
Material Usage Variance MUV = SR × (SQ - AQ) A
B
Material Mix Variance MMV = SR × (RSQ-AQ) A
B
Material Yield Variance MYV = SR × (SQ - RSQ) A
B

Variance Type Value (₹) Favorable / Adverse

Material Price Variance (MPV) 149.85 Favourable

Material Cost Variance (MCV) 161.85 Favourable

Material Usage Variance (MUV) 12 Favourable

Material Mix Variance (MMV) 39.375 Favourable

Material Yield Variance (MYV) -27.375 Adverse

Check
 Material Cost Variance = Material Price Variance + Mat

161.85 161.85

Material Usage Variance = Material Yield Variance + M

12.00 12

Year Labour Type Standard Hours

2021 Skilled 80
2021 Semi-Skilled 60

STAN
LABOUR TYPE HOURS RATE
SKILLED 88.8 20
SEMI-SKILLED 66.6 12
TOTAL 155.4

LABOUR VARIANCE FORMULAE LABOUR

Labour Cost Variance LCV = (SH × SR) - (AH × AR) Standard

Actual
Labour Rate Variance LRV = AH × (SR - AR) SKILLED
SEMI-SKILLED
Labour Efficiency Variance LEV = SR × (SH - AH) SKILLED
SEMI-SKILLED
Labour Mix Variance LMV = SR × (RSH - AH) SKILLED
SEMI-SKILLED
Labour Yield Variance LYV = SR × (SH - RSH) SKILLED
SEMI-SKILLED
 Variance Type Value (₹) Favorable / Adverse

Labour Cost Variance (LCV) -51.4700000000007 Adverse

Labour Rate Variance (LRV) -79.47 Adverse

Labour Efficiency Variance (LEV) 27.9999999999995 Favourable

Labour Mix Variance 27.9999999999995 Favourable

Labour Yield Variance 0E+00 Adverse

Check
Labour Cost Variance = Labor Rate Variance + Labour Efficiency Variance
-51.47 -51.4700000000004 Therefore, Valid
Labour Efficiency Variance = Labour Yield Variance + Labour Mix Variance
28.00 27.9999999999995 Therefore, Valid
 MATERIAL VARIANCES
DATA AVAILABLE

Std Price (₹)

22
12

TABLE
STANDARD OUTPUT ( 75 kg )
Amount
660
216
876

CALCULATING VARIANCES

CALCULATION

62.1
87.75
876
714.15
66
-54
86.625
-47.25
-20.625
-6.75

INFERENCES

Inference
 The Material Price Variance is favourable for both materials A and B, contributing a total of
₹149.85. Material A accounts for ₹62.1 and Material B for ₹87.75. This indicates that the actual
purchase price of both materials was lower than the standard price set in the budget. The
higher favourable variance in Material B suggests that there was more effective negotiation or
sourcing efficiency for that material. This could be due to discounts, bulk purchasing, or
favorable market conditions. Overall, it reflects strong procurement practices and cost control
in raw material acquisition.

The Material Cost Variance is also favourable, amounting to ₹161.85. This is calculated by
comparing the standard cost (₹876) to the actual cost incurred (₹714.15). A favourable cost
variance implies that the organization spent less on materials than expected. This overall
efficiency can be attributed to favourable performance in both pricing and usage of materials.
It suggests that material-related operations are running below the expected budget, which is a
positive indicator for profitability and cost management.

The Material Usage Variance shows a net favourable outcome of ₹12. Material A contributed
positively with a variance of ₹66, whereas Material B recorded an adverse variance of ₹54.
This means that while Material A was used more efficiently than planned, Material B was
consumed in excess of what was budgeted. The net favourable variance shows that despite
the inefficiency in Material B, the overall usage was still efficient. However, the adverse result
for Material B needs to be investigated further to determine if the overuse was due to poor
planning, production issues, or wastage.

The Material Mix Variance is favourable at ₹39.375. Material A has a strong positive mix
variance of ₹86.625, while Material B has a negative variance of ₹47.25. This implies that
Material A was used in a more optimal proportion in the mix compared to Material B, which
deviated from the standard or ideal mix ratio. A favourable mix variance generally indicates
that the material composition was managed well, potentially substituting costlier or less
efficient materials with better ones. Nonetheless, the negative variance in Material B's mix
indicates a need to ensure that substitutions or adjustments are in line with cost and
performance expectations.

The Material Yield Variance is adverse, totaling ₹27.375, with Material A contributing -₹20.625
and Material B -₹6.75. This adverse result indicates that the actual output (yield) from the
materials used was lower than expected. It suggests inefficiencies in the conversion process,
where more materials were consumed but yielded less finished product. Causes could include
wastage, rework, poor quality input materials, or operational inefficiencies. Yield variance is
critical because it directly affects productivity and cost — efforts should be made to investigate
and reduce these losses through process improvements or better quality control.

Check
ial Price Variance + Material Usage Variance

Therefore, Valid

terial Yield Variance + Material Mix Variance

Therefore, Valid

LABOUR VARIANCES

DATA AVAILABLE

Standard Rate Per Hour (₹)

20
12

TABLE
STANDARD
AMT
1776
799.2
2575.2

CALCULATING VARIANCES
CALCULATION

2575.2
2626.67
(₹170.60)
₹91.13
₹70.00
(₹42.00)
₹70.00
(₹42.00)
₹0
₹0

INFERENCES
 Inference

The Labour Cost Variance is adverse at ₹51.47, indicating that the total labour cost incurred
was higher than expected for the level of output produced. This could be the result of a higher
wage rate, inefficiencies in time management, or unproductive labour hours. Since this is the
net result of all other variances, it suggests that the positive gains from efficiency and mix
were not enough to offset the increased costs from adverse rate variance. This is a red flag and
indicates the need to review wage structures and labour planning closely.

The Labour Rate Variance is adverse at ₹79.47, meaning the actual wage rate paid to workers
was significantly higher than the standard wage rate. This could stem from overtime
payments, hiring skilled labour at premium rates, or changes in the wage structure not
reflected in the budget. The adverse rate variance is the main contributor to the overall
unfavourable labour cost variance. To address this, management should investigate the reason
for wage increases — whether they were unavoidable or could have been better planned.

The Labour Efficiency Variance is favourable at ₹28, showing that less time was taken than
planned to complete the given work. This suggests good workforce productivity, possibly due
to skilled workers, better supervision, or streamlined production processes. A favourable LEV
helps reduce costs and improve margins, and it's a strong indication that the labour force is
effectively utilized. This gain partially offsets the losses from the adverse LRV.

The Labour Mix Variance is also favourable at ₹28, implying that the combination of labour
types used was more cost-efficient than planned. This could be the result of replacing higher-
paid workers with lower-paid ones where possible, without compromising on quality. It
reflects flexibility and efficiency in workforce deployment, contributing positively to cost
control.

The Labour Yield Variance is neutral (₹0), meaning that the actual output from the total labour
input was exactly as expected. There was no loss or gain in productivity in terms of overall
output. While not favourable, it’s still a positive sign that the production process is predictable
and stable with respect to labour input-output ratio. This indicates process consistency and
minimal wastage in terms of labour utilization.
 Standard
Actual Qty Actual Price (₹) Output
(kg)
27 19.7
50
22.5 8.1

ACTUAL OUTPUT ( 75 kg )
Quantity Rate Amount
27 19.7 531.9
22.5 8.1 182.25
49.5 714.15

VALUE TYPE

149.85 Favourable

161.85 Favourable

12 Favourable

39.375 Favourable

-27.375 Adverse
Actual
Actual Rate Per Hour (₹)
Hours
85.3 22
70.1 10.7

Actual
HOURS RATE AMT
85.3 22 1876.6
70.1 10.7 750.07
155.4 2626.67

VALUE TYPE

-51.47 Adverse

-79.47 Adverse

28 Favourable

28 Favourable

0 Favourable
Actual
Output
(kg)

60

RSQ
30.9375
18.5625
49.5
RSH

88.8
66.6
155.4
 Year Material Standard Qty

2021 A 28
2021 B 18

RM STANDARD O
Quantity Rate
A 31.5636363636364 20
B 20.2909090909091 15
INPUT 51.8545454545455

MATERIAL VARIANCE FORMULAE MATERIAL

Material Price Variance MPV = AQ × (SR - AR) A

B
Material Cost Variance MCV = (SR × SQ) - (AR × AQ) Standard
Actual
Material Usage Variance MUV = SR × (SQ - AQ) A
B
Material Mix Variance MMV = SR × (RSQ-AQ) A
B
Material Yield Variance MYV = SR × (SQ - RSQ) A
B

Variance Type Value (₹) Favorable / Adverse

Material Price Variance (MPV) -95.32 Adverse

Material Cost Variance (MCV) -215.183636363637 Adverse

Material Usage Variance (MUV) -119.863636363636 Adverse

Material Mix Variance (MMV) 14.4782608695652 Favourable

Material Yield Variance (MYV) -134.341897233202 Adverse

Check
Material Cost Variance = Material Price Variance + Mat

-215.18 -215.183636363636

Material Usage Variance = Material Yield Variance + M

-119.86 -119.863636363636

Year Labour Type Standard Hours

2021 Skilled 90
2021 Semi-Skilled 65
 STAN
LABOUR TYPE HOURS RATE
SKILLED 96.2709677419355 22
SEMI-SKILLED 69.5290322580645 13
TOTAL 165.8

LABOUR VARIANCE FORMULAE LABOUR

Labour Cost Variance LCV = (SH × SR) - (AH × AR) Standard

Actual
Labour Rate Variance LRV = AH × (SR - AR) SKILLED
SEMI-SKILLED
Labour Efficiency Variance LEV = SR × (SH - AH) SKILLED
SEMI-SKILLED
Labour Mix Variance LMV = SR × (RSH - AH) SKILLED
SEMI-SKILLED
Labour Yield Variance LYV = SR × (SH - RSH) SKILLED
SEMI-SKILLED

Variance Type Value (₹) Favorable / Adverse

Labour Cost Variance (LCV) -320.77129032258 Adverse

Labour Rate Variance (LRV) -329.51 Adverse

Labour Efficiency Variance (LEV) 8.73870967741965 Favourable
Labour Mix Variance 8.73870967741965 Favourable
Labour Yield Variance 0E+00 Adverse

Check
Labour Cost Variance = Labor Rate Variance + Labour Efficiency Variance
-320.77 -320.77129032258 Therefore, Valid
Labour Efficiency Variance = Labour Yield Variance + Labour Mix Variance
8.74 8.73870967741965 Therefore, Valid
 MATERIAL VARIANCES
DATA AVAILABLE

Std Price (₹)

20
15

TABLE
STANDARD OUTPUT ( 75 kg )
Amount
631.272727272727
304.363636363636
935.636363636364

CALCULATING VARIANCES

CALCULATION

-116.2
20.88
935.636363636364
1150.82
-32.7272727272728
-87.1363636363637
57.9130434782608
-43.4347826086956
-90.6403162055337
-43.7015810276681

INFERENCES

Inference
 The company incurred higher material costs than expected due to increased purchase prices.
This could be the result of supplier rate hikes, lack of volume discounts, or last-minute
procurement at premium rates, indicating a need for improved sourcing strategies.

The overall material expenditure exceeded the budgeted amount. This combines the effects of
price and quantity variances, signaling that both purchasing and consumption processes
require tighter control to minimize unnecessary cost escalation.

More materials were consumed than anticipated to produce the output, suggesting
inefficiencies such as wastage, inaccurate measurement, or process flaws in production.
There's a clear need to enhance production discipline and material handling.

The proportion of materials used deviated from the standard mix in a way that actually
reduced costs. This indicates that a more cost-effective mix was achieved, possibly through
better planning or favorable material substitutions.

Despite the material mix, the overall output was lower than expected for the quantity of input
used. This points to process inefficiencies, losses, or quality issues in production, suggesting
that output-per-input ratios must be monitored more closely.

Check
ial Price Variance + Material Usage Variance

Therefore, Valid

terial Yield Variance + Material Mix Variance

Therefore, Valid

LABOUR VARIANCES

DATA AVAILABLE

Standard Rate Per Hour (₹)

22
13
 TABLE
STANDARD
AMT
2117.96129032258
903.877419354839
3021.83870967742

CALCULATING VARIANCES
CALCULATION

3021.83870967742
3342.61
(₹209.66)
(₹119.85)
₹21.36
(₹12.62)
₹21.36
(₹12.62)
₹0
₹0

INFERENCES
Inference

The total labour cost exceeded the standard. You spent more on labour overall.

Labour was paid at a higher rate than standard — possibly due to overtime, wage hikes, or
skilled workers.
Labour worked more efficiently than expected, saving time or effort.
The combination of workers used (skilled/unskilled) was better than standard.
Output per input is as expected — no gain or loss in output performance.
 Standard
Actual Qty Actual Price (₹) Output
(kg)
33.2 23.5
55
26.1 14.2

ACTUAL OUTPUT ( 75 kg )
Quantity Rate Amount
33.2 23.5 780.2
26.1 14.2 370.62
59.3 1150.82

VALUE TYPE

-95.32 Adverse

-215.1836364 Adverse

-119.8636364 Adverse

14.47826087 Favourable

-134.3418972 Adverse
Actual
Actual Rate Per Hour (₹)
Hours
95.3 24.2
70.5 14.7
 Actual
HOURS RATE AMT
95.3 24.2 2306.26
70.5 14.7 1036.35
165.8 3342.61

VALUE TYPE

-320.7712903 Adverse

-329.51 Adverse

8.7387096774 Favourable

8.7387096774 Favourable

0 Favourable
 Actual
Output
(kg)

62

RSQ
36.09565217
23.20434783
59.3
 RSH

96.27096774
69.52903226
165.8
 M

Year Material
2021 A
2021 B

MATERIAL QTY
A 33.5
B 24.5666666666667
TOTAL 51.8545454545455

CAL
MATERIAL VARIANCE FORMULAE

Material Price Variance MPV = AQ × (SR - AR)

Material Cost Variance MCV = (SR × SQ) - (AR × AQ)

Material Usage Variance MUV = SR × (SQ - AQ)

Material Mix Variance MMV = SR × (RSQ-AQ)

Material Yield Variance MYV = SR × (SQ - RSQ)

Variance Type Value (₹)

Material Price Variance (MPV) 178.74

Material Cost Variance (MCV) 76.4733333333334

Material Usage Variance (MUV) -102.266666666667

Material Mix Variance (MMV) 79.4923076923077

Material Yield Variance (MYV) -181.758974358974

Check
Material Cost Variance = Material Price Variance + Mater
76.47 76.4733333333334
Material Usage Variance = Material Yield Variance + Ma
-102.27 -102.266666666667

Year Labour Type

2021 Skilled
2021 Semi-Skilled

LABOUR TYPE HOURS

SKILLED 103.371428571429
SEMI-SKILLED 77.5285714285714
TOTAL 180.9

CAL
LABOUR VARIANCE FORMULAE

Labour Cost Variance LCV = (SH × SR) - (AH × AR)

 Labour Rate Variance LRV = AH × (SR - AR)

Labour Efficiency Variance LEV = SR × (SH - AH)

Labour Mix Variance LMV = SR × (RSH - AH)

Labour Yield Variance LYV = SR × (SH - RSH)

Variance Type Value (₹)

Labour Cost Variance (LCV) 6.02999999999884

Labour Rate Variance (LRV) -14.0700000000002

Labour Efficiency Variance (LEV) 20.0999999999998

Labour Mix Variance 20.1000000000003

Labour Yield Variance -5E-13

Check
Labour Cost Variance = Labor Rate Variance + Labour Efficiency Variance
6.03 6.02999999999955
Labour Efficiency Variance = Labour Yield Variance + Labour Mix Variance
20.10 20.0999999999998
 MATERIAL VARIANCES

DATA AVAILABLE

Standard Qty Std Price (₹)

30 25
22 14

TABLE
STANDARD
RATE AMT
25 837.5
14 343.933333333333
1181.43333333333

CALCULATING VARIANCES
MATERIAL CALCULATION

A 127.8
B 50.94
Standard 1181.43333333333
Actual 1104.96
A -50
B -52.2666666666667
A 78.8461538461538
B 0.646153846153844
A -128.846153846154
B -52.9128205128205

INFERENCES
Favorable / Adverse Inference

The company managed to procure materials at rates lower than expected. This
Favourable may be due to early purchases, supplier discounts, better negotiations, or effective
sourcing strategies. It reflects well on the procurement function’s cost control and
supplier engagement.

Overall material expenses were lower than budgeted, which indicates strong
Favourable coordination between purchase price and consumption quantity. However, this
shouldn’t create complacency, as some inefficiencies are masked by favorable
pricing.
 More material was consumed than the standard requirement to produce the
Adverse actual output. This could be due to wastage, spillage, poor planning, or lack of
training. The variance flags a need to improve supervision and control at the shop
floor level.

A better-than-standard material mix was achieved, which helped reduce costs.

Favourable This may be due to using more cost-effective substitutes without compromising on
quality. It reflects thoughtful production planning or flexibility in raw material
usage.

Even though the material mix was favorable, the actual output generated was
Adverse lower than expected. This suggests possible process losses, quality issues, or
machinery inefficiencies. Regular process audits and yield benchmarking could
help identify the root causes.

Check
Material Price Variance + Material Usage Variance
Therefore, Valid
= Material Yield Variance + Material Mix Variance
Therefore, Valid

LABOUR VARIANCES

DATA AVAILABLE

Standard Hours Standard Rate Per Hour (₹)

100 ₹22
75 ₹15

TABLE
STANDARD
RATE AMT
₹22 2274.17142857143
₹15 1162.92857142857
3437.1

CALCULATING VARIANCES
LABOUR CALCULATION

Standard 3437.1
Actual 3431.07
 SKILLED ₹90.45
SEMI-SKILLED (₹104.52)
SKILLED ₹63.17
SEMI-SKILLED (₹43.07)
SKILLED ₹63.17
SEMI-SKILLED (₹43.07)
SKILLED (₹0)
SEMI-SKILLED (₹0)

INFERENCES

Favorable / Adverse Inference

The overall labour cost was slightly below the standard, indicating that
Favourable labour expenses were effectively managed. This could be due to savings in
hourly rates or efficient manpower allocation.
Labour was paid at a higher rate than standard — likely due to overtime,
Adverse increased reliance on skilled workers, or a rise in wage rates. This may
require a closer review of pay structures or shift planning.
Workers completed tasks faster or with fewer hours than expected,
Favourable resulting in better productivity. This points to strong supervision, training,
or motivated labour teams.
A more optimal mix of skilled and semi-skilled labour was used, which
Favourable improved overall cost-effectiveness. This indicates good labour planning
and possibly a shift toward more economical roles.
Output was consistent with expectations — no significant deviation in
Adverse productivity per labour hour. This shows stable workforce performance,
though there’s still room to improve yield further.

Therefore, Valid

Therefore, Valid
 Actual Price Standard Actual
Actual Qty
(₹) Output (kg) Output (kg)
35.5 21.4
60 67
28.3 12.2

Actual
RSQ
QTY RATE AMT
35.5 21.4 759.7 38.65384615385
28.3 12.2 345.26 28.34615384615
59.3 1104.96 67

VALUE TYPE

178.74
Favourable
76.4733333333
Favourable
-102.266666667
Adverse
79.4923076923
Favourable
-181.758974359
Adverse
Actual Actual Rate
Hours Per Hour (₹)
100.5 ₹21.10
80.4 ₹16.30

Actual
RSH
HOURS RATE AMT
100.5 ₹21.10 2120.55 103.3714285714
80.4 ₹16.30 1310.52 77.52857142857
180.9 3431.07 180.9

VALUE TYPE

6.03 Favourable
 -14.07 Adverse

20.1 Favourable

20.1 Favourable

-5.2580162E-13 Adverse
 Year Material Standard Qty

2023 A 32
2023 B 25

RM STANDARD OUTP
Quantity Rate
A ₹34 ₹23
B ₹27 ₹13
INPUT ₹61

MATERIAL VARIANCE FORMULAE MATERIAL

Material Price Variance MPV = AQ × (SR - AR) A

B
Material Cost Variance MCV = (SR × SQ) - (AR × AQ) Standard
Actual
Material Usage Variance MUV = SR × (SQ - AQ) A
B
Material Mix Variance MMV = SR × (RSQ-AQ) A
B
Material Yield Variance MYV = SR × (SQ - RSQ) A
B

Variance Type Value (₹) Favorable / Adverse

Material Price Variance (MPV) -77.68 Adverse

Material Cost Variance (MCV) -168.164615384616 Adverse

Material Usage Variance (MUV) -90.4846153846155 Adverse

Material Mix Variance (MMV) 8.45614035087721 Favourable

Material Yield Variance (MYV) -98.9407557354927 Adverse

Check
Material Cost Variance = Material Price Variance + Mater

-168.16 -168.164615384616

Material Usage Variance = Material Yield Variance + Ma

-90.48 -90.4846153846155

Year Labour Type Standard Hours

2021 Skilled 105
2021 Semi-Skilled 80

STANDA
LABOUR TYPE HOURS RATE
 SKILLED 117.032432432432 24
SEMI-SKILLED 89.1675675675676 17
TOTAL 206.2

LABOUR VARIANCE FORMULAE LABOUR

Labour Cost Variance LCV = (SH × SR) - (AH × AR) Standard

Actual
Labour Rate Variance LRV = AH × (SR - AR) SKILLED
SEMI-SKILLED
Labour Efficiency Variance LEV = SR × (SH - AH) SKILLED
SEMI-SKILLED
Labour Mix Variance LMV = SR × (RSH - AH) SKILLED
SEMI-SKILLED
Labour Yield Variance LYV = SR × (SH - RSH) SKILLED
SEMI-SKILLED

Variance Type Value (₹) Favorable / Adverse

Labour Cost Variance (LCV) -400.582972972973 Adverse

Labour Rate Variance (LRV) -397.31 Adverse

Labour Efficiency Variance (LEV) -3.27297297297299 Adverse

Labour Mix Variance -3.27297297297299 Adverse

Labour Yield Variance 0E+00 Adverse

Check
Labour Cost Variance = Labor Rate Variance + Labour Efficiency Variance
-400.58 -400.582972972973 Therefore, Valid
Labour Efficiency Variance = Labour Yield Variance + Labour Mix Variance
-3.27 -3.27297297297299 Therefore, Valid
 MATERIAL VARIANCES
DATA AVAILABLE

Std Price (₹)

23
13

TABLE
STANDARD OUTPUT ( 75 kg )
Amount
₹793
₹350
₹1,143

CALCULATING VARIANCES

CALCULATION

-47.58
-30.1
1142.61538461538
1310.78
-49.1846153846155
-41.3
19.4491228070176
-10.9929824561404
-68.633738191633
-30.3070175438596

INFERENCES

Inference

The material price variance is adverse, with a total of ₹-77.68, indicating that the actual
purchase prices of materials were higher than the standard rates. Material A had a more
significant impact with a price difference of ₹47.58. This suggests inefficiency in procurement
or unfavorable supplier terms.
 The material cost variance is also adverse at ₹-168.16, meaning that the total cost incurred for
materials exceeded the expected (standard) cost. This overall adverse result is due to a
combination of price and quantity inefficiencies, reflecting a need for better cost control in
material management.

The usage variance is adverse at ₹-90.48, which shows that more material was consumed than
planned for the given level of production. Both materials A and B contributed to this overuse,
suggesting inefficiencies in the production process, potential wastage, or quality issues leading
to rework.

The mix variance is favourable at ₹8.46, indicating that the combination of materials used was
more cost-effective than the standard mix. Material A contributed positively to this variance,
offsetting the adverse impact from Material B. This points to good decision-making in selecting
the proportions of inputs.

The yield variance is adverse at ₹-98.94, highlighting that the actual output derived from the
materials was less than expected. Material A had a larger negative impact, suggesting issues
with the efficiency of converting materials into finished goods, possibly due to process
inefficiencies or spoilage.

Check
erial Price Variance + Material Usage Variance

Therefore, Valid

aterial Yield Variance + Material Mix Variance

Therefore, Valid

LABOUR VARIANCES

DATA AVAILABLE

Standard Rate Per Hour (₹)

24
17

TABLE
STANDARD
AMT
 2808.77837837838
1515.84864864865
4324.62702702703

CALCULATING VARIANCES
CALCULATION

4324.62702702703
4725.21
(₹282.00)
(₹115.31)
(₹11.22)
₹7.95
(₹11.22)
₹7.95
₹0
₹0

INFERENCES
Inference
The labour cost variance is adverse at ₹-400.58, which indicates that the actual cost of labour
exceeded the standard expected cost. This overall adverse outcome reflects a combination of
higher wage rates and inefficiencies in labour time usage.

The labour rate variance is significantly adverse at ₹-397.31, driven primarily by higher actual
wages compared to standard rates. Skilled labour contributed ₹-282.00 and semi-skilled ₹-
115.31 to this variance, suggesting wage rates were not effectively controlled.

The efficiency variance is adverse at ₹-3.27, which implies that more labour hours were used
than expected for the actual output. Skilled workers showed a slight inefficiency of ₹-11.22,
indicating potential productivity issues or poor time management.

Labour mix variance is also adverse at ₹-3.27, caused by a less-than-optimal combination of

skilled and semi-skilled labour. Although semi-skilled labour had a positive variance of ₹7.95,
the negative impact from skilled labour (₹-11.22) outweighed the benefit.

Labour yield variance is neutral (₹0) for both skilled and semi-skilled labour, indicating that the
overall output achieved from the total labour hours was in line with expectations. This is a favourable
outcome, showing that despite inefficiencies, the yield remained unaffected.
 Standard
Actual Qty Actual Price (₹) Output
(kg)
36.6 24.3
65
30.1 14

ACTUAL OUTPUT ( 75 kg )
Quantity Rate Amount
₹37 ₹24 ₹889
₹30 ₹14 ₹421
₹67 ₹1,311

VALUE TYPE

-77.68 Adverse

-168.1646154 Adverse

-90.48461538 Adverse

8.4561403509 Favourable

-98.94075574 Adverse
Actual
Actual Rate Per Hour (₹)
Hours
117.5 26.4
88.7 18.3

Actual
HOURS RATE AMT
 117.5 26.4 3102
88.7 18.3 1623.21
206.2 4725.21

VALUE TYPE

-400.582973 Adverse

-397.31 Adverse

-3.272972973 Adverse

-3.272972973 Adverse

0 Favourable
Actual
Output
(kg)

70

RSQ

₹37
₹29
₹67
RSH
117.0324324
89.16756757
206.2
 Year Material Standard Qty

2024 A 34 kg
2024 B 27 kg

RM STANDARD OUTP
Quantity Rate
A 37.5 26
B 29.7 16
INPUT 67.2

MATERIAL VARIANCE FORMULAE MATERIAL

Material Price Variance MPV = AQ × (SR - AR) A

B
Material Cost Variance MCV = (SR × SQ) - (AR × AQ) Standard
Actual
Material Usage Variance MUV = SR × (SQ - AQ) A
B
Material Mix Variance MMV = SR × (RSQ-AQ) A
B
Material Yield Variance MYV = SR × (SQ - RSQ) A
B

Variance Type Value (₹) Favorable / Adverse

Material Price Variance (MPV) -48.53 Adverse

Material Cost Variance (MCV) -130.93 Adverse

Material Usage Variance (MUV) -82.4 Adverse

Material Mix Variance (MMV) 23.2999999999999 Favourable

Material Yield Variance (MYV) -105.7 Adverse

Check
Material Cost Variance = Material Price Variance + Mater

-130.93 -130.93

Material Usage Variance = Material Yield Variance + Ma

-82.40 -82.4

Year Labour Type Standard Hours

2021 Skilled 110
2021 Semi-Skilled 85

STANDA
LABOUR TYPE HOURS RATE
SKILLED 121.32 ₹26
SEMI-SKILLED 93.75 ₹18
TOTAL 215.07
 LABOUR VARIANCE FORMULAE LABOUR

Labour Cost Variance LCV = (SH × SR) - (AH × AR) Standard

Actual
Labour Rate Variance LRV = AH × (SR - AR) SKILLED
SEMI-SKILLED
Labour Efficiency Variance LEV = SR × (SH - AH) SKILLED
SEMI-SKILLED
Labour Mix Variance LMV = SR × (RSH - AH) SKILLED
SEMI-SKILLED
Labour Yield Variance LYV = SR × (SH - RSH) SKILLED
SEMI-SKILLED

Variance Type Value (₹) Favorable / Adverse

Labour Cost Variance (LCV) -200.110000000001 Adverse

Labour Rate Variance (LRV) -69.33 Adverse

Labour Efficiency Variance (LEV) -130.78 Adverse

Labour Mix Variance -4.03314269772636 Adverse

Labour Yield Variance -1E+02 Adverse

Check
Labour Cost Variance = Labor Rate Variance + Labour Efficiency Variance
-200.11 -200.11 Therefore, Valid
Labour Efficiency Variance = Labour Yield Variance + Labour Mix Variance
-130.78 -130.78 Therefore, Valid
 MATERIAL VARIANCES
DATA AVAILABLE

Std Price (₹)

₹26
₹16

TABLE
STANDARD OUTPUT ( 75 kg )
Amount
975
475.2
1450.2

CALCULATING VARIANCES

CALCULATION

-41.6900000000001
-6.83999999999998
1450.2
1581.13
-10.4
-72.0000000000001
60.58
-37.28
-70.9799999999999
-34.72

INFERENCES

Inference

Material cost inefficiencies have almost reduced to half but continue to remain unfavourable. This can
be due to reasons like increase in raw material prices due to inflation or supplier issues or buying from
costlier alternate suppliers due to stock - outs.
 The variance has improved as compared to last year but continues to remain unfavourable. This means
that company still pays higher raw material prices but is negotiating better than last year. This
unfavourable condition can happen due to inflation or issues with suppy chain or any currency
fluctuations for imported materials.

The variance continues to remain unfavourable. It can be due to reasons like excessive wastage during
production or poor handling/storage leading to spoilage or damage of materials. However, the
variance has improved as compared to last year which suggests that measures are being taken to
improve process efficiency and cost control.

Despite better usage efficiency, actual yield from raw materials has dropped significantly. This indicates
either quality issues with raw materials or inefficiencies in conversion. This in turn would also lead to
batch rejections due to failed quality checks.

This variance has significantly improved as compared to last year. This suggests that measures were
taken to ensure proper material proportioning and planning leading to positive impact on cost.

Check
erial Price Variance + Material Usage Variance

Therefore, Valid

aterial Yield Variance + Material Mix Variance

Therefore, Valid

LABOUR VARIANCES

DATA AVAILABLE

Standard Rate Per Hour (₹)

₹26
₹18

TABLE
STANDARD
AMT
3154.32
1687.5
4841.82
 CALCULATING VARIANCES
CALCULATION

4841.82
5041.93
₹112.50
(₹181.83)
(₹95.68)
(₹35.10)
(₹13.11)
₹9.07
(₹83)
(₹44)

INFERENCES
Inference
Although the variance continues to be unfavorable, it has significantly reduced as compared to last
year which suggests that the company has made significant strides in controlling overall labour costs.
This can include measures like better shift scheduling, wage structure optimization.
This variance has reduced almost 5 times as compared to last year which indicates that the company is
now hiring closer to the standard rate. This could be due to successful renegotiations with unions or
better labour forecasting which also helped to avoid urgent hiring at premium rates.
The variance continues to remain adverse. It has improved as compared to last year which means that
workers are completing tasks faster. This can be due to training programs being implemented or better
supervision or task allocation.

This is a major concern as the variance has deteriorated by a significant number. It means that the
output per labour hour dropped substantially. This can be due to various reasons like decline in the
quality of materials which may affect the yield, workers doing more rework leading to employee
fatigue or the company is facing machine breakdowns.
There has been a slight dip in the variance as compared to last year, hence it’s not a major concern.
This can happen due to factors like misallocation of workforce skills or temporary unavailability of
skilled labour.
 Standard
Actual Qty Actual Price (₹) Output
(kg)
37.9 kg ₹27.1 68
34.2 kg ₹16.2

ACTUAL OUTPUT ( 75 kg )
Quantity Rate Amount
37.9 27.1 1027.09
34.2 16.2 554.04
72.1 1581.13

VALUE TYPE

-48.53 Adverse

-130.93 Adverse

-82.4 Adverse

23.3 Favourable

-105.7 Adverse
Actual
Actual Rate Per Hour (₹)
Hours
125 ₹25.10
95.7 ₹19.90

Actual
HOURS RATE AMT
125 ₹25.10 3137.5
95.7 ₹19.90 1904.43
220.7 5041.93
 VALUE TYPE

-200.11 Adverse

-69.33 Adverse

-130.78 Adverse

-4.033142698 Adverse

-126.7468573 Adverse
Actual
Output
(kg)
75

RSQ

40.23
31.87
72.1
 RSH
124.4958572
96.20414284
220.7
 CONCLUSION
- After analyzing material and labour variances over the past five years (2020–2024), i
just about buying cheaper inputs but also about optimizing internal efficiency.
- While favorable price variances were observed in some years due to good supplier n
issues arose from material wastage, improper labour planning, and inefficient outpu
- One of the most concerning trends was the highly adverse labour mix variance in 2
vs semi-skilled labour was not proportionately planned — leading to higher than nece
- Conversely, favourable labour rate variances in multiple years show that hiring strate
were effectively managed.
- This study highlights that variance analysis is not only a costing tool but a strategic
Through better forecasting, training, procurement strategy, and supervision, variance
improved.
LUSION
st five years (2020–2024), it is clear that controlling costs is not
internal efficiency.
ears due to good supplier negotiation, the most significant
ning, and inefficient output-to-input yield.
e labour mix variance in 2022 and 2024, indicating that skilled
eading to higher than necessary costs.
ears show that hiring strategies and market wage negotiations

osting tool but a strategic decision-making framework.

and supervision, variances can be minimized and profitability