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The standard raw material cost for a unit of production is 2kg at $4 per kg.Purchases for a period were 13,000 kg at an actual cost of $4.50 per kg.Raw material inventories valued at standard cost,increased by $8000 in the period.Budgeted production for the period was 6000 units but actual production was only 5000 units
Ans: $4000 Adverse
Can you help me with this sir?
You have not said what the question asked for. I guess it would have asked for the materials usage variance.
The actually bought 13,000 kg, but 2,000 kg ($8,000/$4) were used to increase inventory so only 11,000 kg were used in production.
The standard usage for the actual production is 5,000 units a 2 kg = 10,000 kg.
Therefore they used 1,000 kg more than they should have, and therefore the variance is 1,000 x $4 = $4,000 adverse.
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