Respected Sir,
A question that carries 10 marks has got me caught up in Material Variances. So I will jot down the part of the Question that relates to my doubt.
Brake Ltd manufactures and distributes brake discs to the automotive sector. The company operates and integrated standard cost system in which :
Purchase of materials are recorded at standard cost.
Direct Material and Labour cost are Variable.
Production overheads are fixed and absorbed using direct labour hours.
Actual and Budgeted data for May are shown below :
Budget direct materials per unit - 2 kg at $5 per kg
Budgeted production for the month - 10,000 units
22,500 kgs of Material was purchased
The total standard cost of Materials was $115,000
Variances calculated for May are as follows :
Material Price Variance $11,250 A
Calculate - a. Actual number of brake discs manufactured
b. Actual price paid per kg of material
c. Material usage variance.
Sir, how is it that they got ACTUAL number of discs manufactured as 11,500 units in the answer for part a ? The only way we get this is dividing $115,000 by $10, wouldn't that be wrong ?
I managed to get part b as $5.5/kg
I can only do part c if I get my doubt of part a cleared
Ask the Tutor ACCA MA
Material Variance
8y ago#1Dividing 115,000 by 10 is certainly not wrong!!
The standard materials cost per unit is 2 x $5 = $10.
The standard cost of materials is $115,000 in total.
Therefore they must have produced 115,000/10 = 11,500 units.
Makes sense sir, i was confused thinking standard cost of materials mean the cost we budgeted for materials. Instead, its the cost that we should pay for the materials. I hope what i wrote now is correct.
Thank you for the help.
8y ago#3Yes - what you have written now is correct :-)
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