Sorry I might have made a misstatement. The Closing inventory is deducted from Actual Purchase to arrive at Actual Production/used.
The result nevertheless seems to be the same no. of kgs for both Actual Purchase and Actual Usage at Standard Cost. So I dont see any usage difference along with price. Only price differs, and hence should match $160,200 for Materials cost under Flexed Budget.
J
John MoffatTutor·
There is no closing inventory of materials.
There is certainly a usage variance!!
They actually produced 8,900 units and therefore should have used 8,900 x 4 = 35,600 kgs.
They actually used 35,464 kgs.
J
John MoffatTutor·
Because the usage changed as well as the price.
A
Asif·
For both Actual Purchase and Actual Usage you use 35464kg, so how is usage different along with price ?
If actual usage was different since production was more than sales, we should have subtracted (400units x $4.5) closing inventory from actual purchase, then we could say the actual usage was different as well. But you don’t seem to do that in the workings. You use the same figure as in the actual purchase.
A
Asif·
A splendid effort sir - really helped sink in a heavy yet useful chapter due to your ability to teach.
C
Camille·
Hi sir,
Would it be ok to say that standard cost refers to the same as the budgeted cost?
J
John MoffatTutor·
Yes :-)
C
Camille·
Thank you sir
J
John MoffatTutor·
You are welcome :-)
R
rafapak·
Dear Mr Moffat
When calculating material quantity variance you found out you saved 136 kilograms. When you wanted to calculate your saving in terms of money you multiplied 136 kilograms by standard price which is 4,50 dollars. Why didn't you use actual cost when you calculated your savings ? Why we have to use standard cost when we calculate savings. Standard cost is not real cost so why do we use standard cost when we calculate our real saving in terms of money ?
A
awinmas·
I think that would come under financial accounting, but management accounting we should use std cost of material.Lets wait for Sir John to reply.
The result nevertheless seems to be the same no. of kgs for both Actual Purchase and Actual Usage at Standard Cost. So I dont see any usage difference along with price. Only price differs, and hence should match $160,200 for Materials cost under Flexed Budget.
There is certainly a usage variance!!
They actually produced 8,900 units and therefore should have used 8,900 x 4 = 35,600 kgs.
They actually used 35,464 kgs.
If actual usage was different since production was more than sales, we should have subtracted (400units x $4.5) closing inventory from actual purchase, then we could say the actual usage was different as well. But you don’t seem to do that in the workings. You use the same figure as in the actual purchase.
Would it be ok to say that standard cost refers to the same as the budgeted cost?
When calculating material quantity variance you found out you saved 136 kilograms. When you wanted to calculate your saving in terms of money you multiplied 136 kilograms by standard price which is 4,50 dollars. Why didn't you use actual cost when you calculated your savings ? Why we have to use standard cost when we calculate savings. Standard cost is not real cost so why do we use standard cost when we calculate our real saving in terms of money ?