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Variance Analysis

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Variance Analysis

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 7, 2022 at 7:55 pm #650125
    TMaC123
    Participant
    • Topics: 20
    • Replies: 24
    • ☆

    Hi John, I’m also stuck on this one:

    The standard direct material cost for a product is $50 per unit (12.5 kg at $4 per kg). Last month the actual amount paid for 45,600 kg of material purchased and used was $173,280 and the direct material usage variance was $15,200 adverse.

    What was the direct material price variance last month? Answer $9120 A
    What was the actual production last month? Answer 3344 units

    I could figure out the price variance easily but got stuck on working out the production level. Can you help?

    March 8, 2022 at 8:48 am #650178
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    They actually used 45,600 kg.

    However because there is an adverse usage variance of $15,200 they must have used 15,200/4 = 3,800 kg more than they should have used.

    So they should have used 45,600 – 3,800 = 41,800 kg.

    Given that the standard usage is 12.5kg per unit, they must have produced 41,800/12.5 = 3,344 units.

    March 8, 2022 at 3:50 pm #650251
    TMaC123
    Participant
    • Topics: 20
    • Replies: 24
    • ☆

    Thanks John, that’s super clear.

    March 8, 2022 at 4:05 pm #650258
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Variance Analysis’ is closed to new replies.

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