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You said that in all the cost variances we always compare actual cost vs standard cost with actual production valued at standard cost. We do not compare with the originally budgeted totals.
Material Price:
Total actual cost = actual kgs x actual cost per kg
Total standard cost = actual kgs x standard cost per kgMaterial Usage:
Total standard cost = actual kgs x standard cost per kg
Total budget cost = standard kgs x standard cost per kgIn the material price formula above we are comparing totals of actual cost and standard cost (just like you said we compare actual cost and standard cost). BUT the problem I have is with the material usage formula because we are comparing budget cost and standard cost in that variance like above (why is that?)
What you have written for the price variance is correct.
What you have written for the usage variance is not correct.
We compare the actual kgs with the standard kgs for the actual production, costing both of them at the standard cost per kg. (This is not the total budget cost at all).Have you watched the Paper MA lectures on variances as I suggested?
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