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Dear Mr Moffatt
I asked question under video on variances chapter 26 part 2 MA section. Whenever you have some time, can you please answer this question ? Thanks in advance.
Please ask your question in this forum. Comments under the lectures get moved forward quickly and it is not always possible for me to see them.
Thanks for reply
In chapter 26 part 2 lecture on acca management accounting when calculating material quantity variance you found out you saved 136 kilograms. When you wanted to calculate your saving in terms of money you multiplied 136 kilograms by standard price which is 4,50 dollars. Why didn’t you use actual cost when you calculated your savings ? Why we have to use standard cost when we calculate savings? Standard cost is not real cost so why do we use standard cost when we calculate our real saving in terms of money ?
If you watch the lecture again you will see that we are looking separately at the effect of using a different quantity than standard and paying a different price per kg.
The quantity variance looks only at the effect of using a different number of kgs, and so keeps the price at standard, We then look separately at the effect of paying a different price per kg for the kgs actually purchased.
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