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the standard direct material cost per unit for a product is calculated as follows
10.5 litres at $2.5 per litrelast month the actual price paid for 12000 litres of material used was 4 % above standard and the direct material usage variance was $1815 fav.no stocks of material are held
what was the actual prod last month?
im not getting the logic sir…pls help
It is not so much a question of logic as learning the rules.
Have you watched the free lecture on variances, and learned the rules?To calculate the usage variance we take the difference between the actual usage and the standard usage for the actual production, and multiply the difference by the standard cost per litre.
We know what the variance is, and so the difference between the actual usage and the standard usage must be 1815/2.5 = 726 litres.
We know how many litres were actually used (12,000) and so we now know how many litres should have been used for the actual production: 12,726.
We know the standard usage per unit (10.5 litres) so now you should have no problem calculated how many units were actually produced (12,726/10.5)
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