A chemical is manufactured by combining two standard items of input A (standard price $60/kg.) And B (Standard price $45/kg.) in the ratio 60 % : 40%. 10% of input is lost during processing. If during a month 1,200 kg of the chemical is produced incurring a total cost of $69,600, the total material cost variance will be??
I tried Working out this Question..but i couldnt derive an Answer???
It would be appreciable if could derive the answer with workings
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MAVariance Analysis
And what is the answer that you are talking about, I mean surely you know the right answer so what is it?
My answer is 3000(A)
my answer is 3000(Adverse)
because std cost of actual production is 69000 and the actual cost of production is 1333.333kg * 54/kg =72 000
The difference gives you 3000(A)
Agree with Maureen.
I'm getting a different answer. Rubanjr, what is the answer in the text from where you got the question?
Total Input: 0.90*x = 1200
x = 1200/0.90 = 1333.33 kg
Standard Total cost: (0.60*1333.33*$60) + (0.40*1333.33*45) = $72000
Actual Total cost incurred : $69600
Total material cost variance = $72000 – $69600 = $2400 Favourable
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