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- This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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- March 5, 2021 at 9:40 pm #613541
Please when calculating material usage variance, do we consider the change in production level or focus on the variance between the “standard material that was suppose to be used to produced “X actual units” and the actual material used in production the “X actual units?
For example, if actual units is let say 200 & actual usage was 450kg, but budgeted units was 150 and usage 300kg (i.e 2kg per unit) and standard cost per kg is $10.00.
I thought Total material usage variance should be:
200 units suppose use = (200 x 2) = 400kg
but used = 450kg
Then material usage variance = 50kg Adv
Variance ($) = 50kg x $10 = $500 AdvCan you help assess this?
Thank you.March 6, 2021 at 7:48 am #613684That is correct.
Why not watch my free lectures where this is all explained?
The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
March 6, 2021 at 9:04 am #613705Thank you John
March 6, 2021 at 4:11 pm #613772You are welcome 🙂
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