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The chapter is basic variance analysis

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The chapter is basic variance analysis

A company manufactures a single product L , for which the standard material cost is as follows.

                                                   $ per unit

Material 14 kg x $3 = 42

During July , 800 units of L were manufactured , 12000 kg of material were purchased for $ 33600, of which 11500 kg were issued to production.

SM Co values all inventory at standard cost.

What are the material price and usage variances for July ?

             Price                   Usage 

A. $2300 (F) $900 (A)
B $ 2300 (F) $ 300 (A)
C $ 2400 (F) $ 900 (A)
D $ 2400 (F) $ 840 (A)

May 19th 2017 AN ACCA USER 180 Points

2 Replies

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I am sorry for the typing errors , in advance

May 19th 2017 AN ACCA USER 180 Points
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Material price variance , you must calculate total cost material purchased weather used or not. And for Material usage , u must calculate the material that was actually used while closing inventory must be valued @ standard costs. I hope this helps.

Price variance = $2400Favorable

Qty p x actual cost = $33600
Qty p x Sp= 12000kg x $3= $36000

For material usuage = $900Adverse

Qty used x SP = 11500kg x $3=$ 34500
SQ for the actual production x Sp=800u x14kg x $3=$33600
Value the inventory to be $1500.
Answer should be (C)

May 30th 2017 AN ACCA USER 1,140 Points
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