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The costs below related to the month of June.
Fixed budget flexed budget Actual
2200 units. 2000 units. 2000 unitsTotal direct materials $165000. $ 150000. $ 140000
What was the total direct materials variance?
A) 10000 adverse
B) 10000 favourable
C) 25000 adverse
D) 25000 favourableHow 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 ?
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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