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variances… another question

Forums › ACCA Forums › ACCA MA Management Accounting Forums › variances… another question

  • This topic has 0 replies, 1 voice, and was last updated 10 years ago by mansoor.
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  • September 8, 2014 at 2:39 pm #194314
    mansoor
    Participant
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    the following is a worked example in the text and i dont get it at all
    ——————————————————————–
    – purchases of materials are recorded at std cost
    – direct material costs and direct labor are variable
    – POH are fixed and absorbed using direct labor hours.

    Actual and budgeted data for last month is as follows:

    – budgeted direct materials/unit is 2 kg at$5/kg
    – direct labor 0.5 hours/unit
    – budgeted prod 10,000
    – 22,500 kg of materials were purchased
    – total standard cost of materials was 115,000
    – 6000 direct labor hours were worked at $6/hr
    – budgeted fixed POH were 240,000
    – actual fixed POH were 260,000

    – material price variance 11,250 A
    – labor efficiency var 1750 A
    —————————————————————

    the above is verbaturm

    question: how many widgets were produced?

    this was the first part (1/10) and i cd not get it. It simply says 11,500 were produced.

    i am doing:

    u purchased 22,500 kgs, which means u used an extra 2500 kg in production.

    that means 25000/2 – 1250 extra units were produced, making a total of 11,250.

    where am i going wrong?

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