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Two variance are difference between Actual and Fixed budget
(1) Sales Volume
(2) Fixed OH expenditure variance
While all remaining are between actual and flexed budget.Hi Mr. Maffot
I arrive at the answer to this question a different way. I just want to know if it is a correct way of arriving at the answer.
The standard direct material cost per unit for a product is calculated as follows:
10.5 litres at $2.50 per litre
Last month the actual price paid for 12,000 litres of material used was 4% above standard and the direct
material usage variance was $1,815 favourable. No stocks of material are held.What was the adverse direct material price variance for last month?
My approach : 4/100*2.5*12000=1200
If it is wrong please explain otherwise. Thank you.
Also please explain why the answer for the question multiplies by 1.04.
If the actual price is 4% above the standard price, then the actual price per litre will be
$2.50 + (4% x 2.50) = $2.60 per litre.
(Multiplying $2.50 by 1.04 is the same as adding 4% (0.04) of 2.50.)Given that they actually purchased 12,000 litres, the material price variance is 12,000 x ($2.60 – $2.50) = $1,200.
No, because you end up with the correct answer and that is all that matters.
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