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Variance Analysis

Forums › ACCA Forums › ACCA MA Management Accounting Forums › Variance Analysis

  • This topic has 5 replies, 4 voices, and was last updated 10 years ago by Samit.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • June 12, 2015 at 4:25 am #256509
    rubanjr
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    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

    June 12, 2015 at 5:32 am #256511
    HazE
    Participant
    • Topics: 11
    • Replies: 84
    • ☆☆

    And what is the answer that you are talking about, I mean surely you know the right answer so what is it?

    June 12, 2015 at 6:47 am #256517
    rubanjr
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    My answer is 3000(A)

    June 12, 2015 at 8:42 am #256541
    Maureen
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    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)

    June 12, 2015 at 9:57 am #256555
    HazE
    Participant
    • Topics: 11
    • Replies: 84
    • ☆☆

    Agree with Maureen.

    July 1, 2015 at 2:18 pm #259228
    Samit
    Member
    • Topics: 6
    • Replies: 19
    • ☆

    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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