Match List-I with List-II:

LIST I Types of Variance	LIST II Formula
A. Material Cost Variance	I. (Standard Quantity - Actual Quantity) × Standard Price
B. Material Price Variance	II. (Standard Price - Actual Price) × Actual Quantity
C. Material Usage Variance	III. Standard Cost of Actual Quantity of Actual Mixture – Standard Cost of Actual Quantity of Standard Mixture
D. Material Mix Variance	IV. (Standard Price × Standard Quantity) – (Actual Price × Actual Quantity)

Choose the correct answer from the options given below:

Correct option is D

1. Material Cost Variance (A → IV):

Formula: (Standard Price × Standard Quantity) - (Actual Price × Actual Quantity)
It reflects the total variance in material cost, accounting for both price and usage variances.

2. Material Price Variance (B → II):
Formula: (Standard Price - Actual Price) × Actual Quantity
This measures the impact of price fluctuations on material costs.

3. Material Usage Variance (C → I):
Formula: (Standard Quantity - Actual Quantity) × Standard Price
It reflects the efficiency or inefficiency in using materials.

4. Material Mix Variance (D → III):
Formula: Standard cost of actual quantity of actual mixture - Standard cost of actual quantity of standard mixture
This assesses the impact of changes in the proportions of materials used.

Information Booster

• Material Cost Variance (MCV): It is the sum of price and usage variances. A favorable MCV indicates cost-saving in material procurement or usage, while an adverse variance signals inefficiency.
• Material Price Variance (MPV): Highlights the impact of market price changes or supplier pricing on material costs. Companies monitor this closely to manage procurement strategies.
• Material Usage Variance (MUV): Indicates production efficiency by comparing the actual material used to the expected standard. Inefficiencies in production or wastage increase MUV.
• Material Mix Variance (MMV): Focuses on the effect of altering the material composition in production. A deviation from the standard mix can lead to cost increases or decreases.