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Holmes Ltd uses one raw material for one of their products. The standard
cost per unit at the beginning of the year was $28, made up as follows:
Standard material cost per unit = 7 kg per unit at $4 per kg = $28.
In the middle of the year the supplier had changed the specification of the
material slightly due to problems experienced in the country of origin, so
that the standard had to be revised as follows:
Standard material cost per unit = 8 kg per unit at $3.80 per kg = $30.40.
The actual output for November was 1,400 units. 11,000 kg of material
was purchased and used at a cost of $41,500
Ques- To calculate all the planning and operational material variances. My question is how did they calculated the AQ in Usage variance because below is the answer:
Usage
AQ × AP 11,000 × $4 = $44,000
Operational variance $800 F
AQ × RSP 11,200 × $4 = $44,800
Planning variance $5,600 F
AQ × SP 9,800 × $4 = $39,200
$4,800 FThey produced 1,400 units
The original standard usage was 7 kg per unit. 1,400 x 7 = 9,800 kg
The revised standard usage is 8 kg per unit. 1,400 x 8 = 11,200 kg
The actual usage was 11,000 kg
Have you watched my free lectures on planning and operational variances? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
I first go through your video and then only jump to the chapters in the book but in Kalpan’s book the formula which was given is:
AQ*AP
AQ*RSP
AQ*SP
which got me confused because as per book we need to take AQ and not SQ or RSQ?
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