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Cost variance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Cost variance

  • This topic has 2 replies, 2 voices, and was last updated 9 months ago by John Moffat.
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  • Author
    Posts
  • April 23, 2022 at 12:13 pm #654330
    zainrajput
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    A company incurred the following actual production costs at output of 25,600 units in a period

    $

    Prime costs

    96,470

    Overheads

    79,750

    Budgeted production costs for an output of 24,000 units were:

    Prime costs

    $3.70 per unit

    $57,600 fixed costs plus $0.90 per unit variable costs

    Overheads

    What was the total cost variance in the period comparing actual costs with the flexed budget?

    $860 Adverse

    $8,220 Adverse

    $860 Favourable

    $8,220 Favourable

    Firstly I’m confused where did we study cost variance in Fma syllabus, secondly i tried applying the formula that would give me 96470-88800= 7670, can you please help me out how to calculate total cost variance?

    April 23, 2022 at 12:16 pm #654331
    zainrajput
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    Actually i figured the answer to be 8220 adverse is that correct?

    April 24, 2022 at 6:44 pm #654364
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    The total flexed cost is (25,600 x (3.70 + 0.90)) + 57,600.

    Compare this with the actual total cost.

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