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I’m stuck with this question:
“For product DR, the material price variance for the month of August was $1000 favourable and the material usage variance was $300 adverse.
The standard material usage per unit is 3kg, and the standard material price is $2 per kg. 500 units were produced in the period. Opening inventory of raw material were $100 kg and closing inventory 400kg.What is the material purchase in the period?
The answer is 1950 kg but i don’t know how to get it… Can someone or the tutor explain how to proceedThe standard usage for actual production is 500 x 3kg = 1,500 kg.
Since there is an adverse usage variance, the actual usage of material is 1,500 + 300/2 = 1,650 kg.
There is opening inventory of 100 kg and closing inventory of 400 kg, so the actual purchases must have been 1,650 + 400 – 100 = 1,950 kg
I still don’t understand that question u solved above for usage variance we multiply actual quantity with standard price and subtract that with standard quantity multiply by standard price we get usage variance in this question the variance was 300 adverse
So actual quantity is 500 standard price is 2 per kg =1000
Standard quanty is not given but per unit usage 3 and price 3 =6 is given 300 is adverse so 1000 -300 = 700 divide by 6 we get standard quantity =116.67
AQ* SP
500*2 =1000
SQ *SP
X *3*2=700
———-
300 ad
700
——-= 116.667
6
I m putting values in the formula but it’s taking me nowhere can u please help me
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