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- This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.
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- November 17, 2014 at 7:37 pm #210776
Hi John sir, plz help me with the following question, The answer i find is quiet different and m confused.
A company operates std absorption costing system. The following information has been extracted from the standard cost card of one of its products:
Budgeted production 1,500 units
Direct materials cost: 7 kgs * $4.10 = $28.70 per unitActual results for the period were as follows:
Production 1600 units
Direct material ( purchased and used ) 1200 kgs, cost $52,200It has subsequently been noted that, due to a change in economic conditions, the best price that the material could have been purchased for was $4.50 per kg during the period.
Find material price planning variance
I could not understand the solution , it takes 0.4 difference in price and multiplies it with 11200 units. 11200 UNITS are confusing me.
November 18, 2014 at 9:17 am #210898What you are forgetting is that the prices of 4.10 and 4.50 per kg.
The actual production is 1600 units, but each unit has standard usage of 7 kg, so the standard usage for the actual production is 1600 x 7 = 11,200 kg.
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