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For product DR, the material price variance for the month of August was $1000 Favourable and the material usage variance was $300 adverse.
The standard material usage per unit is 3kg, and the standard material price $2 per kg.
500 units were produced in the period. Opening inventories of raw materials were 100 kg and closing inventories 400kg.What were the material purchases in the period?
Sir in this question, I’ve figured out the material usage to be purchased which is 1950kg, but what I don’t understand is, to find purchases cost we simply multiply usage with standard material price per unit, but in this answer specified in the book we are deducting with 1000 actual material price, could you please explain me that? Sorry if this sounds dumb
Multiplying by the standard material price will give the amount that should have been spent had the price been at standard.
However since there is a price variance of $1,000, they must have spent $1,000 less than at standard cost and so the actual amount spent was $1,000 less.
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