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A company has a budgeted material cost of $125,000 for the production of 25,000 units per month. Each unit is
budgeted to use 2 kg of material. The standard cost of material is $2·50 per kg. Actual materials in the month cost
$136,000 for 27,000 units and 53,000 kg were purchased and used.
What was the adverse material price variance?
A $1,000
B $3,500
C $7,500
D $11,000
can you give me a guidance to solve this question?
I tried many times to do it but it isn’t easy for me.This is not a past exam question! (Past questions are not published by the ACCA for F2)
The standard cost per kg is $125,000 / (25,000 x 2) = $2.50
The actual purchases at standard cost is 53,000 x 2.50 = $132,500
The actual cost for the actual purchases is $136,000
So the variance is 136,000 – 132,500 = $3,500
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