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Question related to Standard costing in bpp kit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Question related to Standard costing in bpp kit

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • April 4, 2024 at 8:15 am #703628
    gayathrivnair001
    Participant
    • Topics: 1
    • Replies: 0
    • ☆

    The costs below related to the month of June.

    Fixed budget flexed budget Actual
    2200 units. 2000 units. 2000 units

    Total direct materials $165000. $ 150000. $ 140000

    What was the total direct materials variance?
    A) 10000 adverse
    B) 10000 favourable
    C) 25000 adverse
    D) 25000 favourable

    How do we get answer as 10000 favourable…it is asked for ” total ” right? So we have to look at both usage and price variance . Am I wrong ?

    April 4, 2024 at 3:26 pm #703645
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The total variance for any expense is always the difference between the actual expenditure and the flexed budget expenditure, and so in this case is 150,000 – 140,000 = 10,000 favourable.

    With more information we could then analyse the 10,000 into the price and usage variances, but this question does not ask for the analysis (and there is not enough information to analyse anyway).

    I do suggest that you watch my free lectures on this. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.

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