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The standard direct material cost for a product is $50 per unit (12.5kg at $4 per kg). Last month the actual amount paid for 45,600kg of material purchased and use was $173,280 and the direct material usage variance was $15,200 adverse.
What was the actual production last month?
This was my answer
Since the adverse variance was $15200 and the the actual was $173280
Then the flexed should be $158080So then I divided $158080 by $50 to get the numer of units but this answer is apparently wrong
The correct answer was 3344 units
The standard cost of the material used is 45,600 kg x $4 = $182,400.
The usage variance was $15,200 adverse and therefore the standard cost of the material that should have been used for the actual production is 182,400 – 15,200 = $167,200.
Given that the standard cost per unit is $50, it means that they must have produced 167,200 / 50 = 3,344 units.
(The fact that they actually paid $173,280 is not relevant – part of the reason for paying the ‘wrong’ amount will be because of the expenditure variance.)
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