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