ACCA Applied Knowledge · Management Accounting · Standard costing system
A company's standard cost card shows 3 kg of material per unit at $4 per kg. In a period, 1,000 units were produced using 3,100 kg, purchased and used at $4.20 per kg. What is the total direct material cost variance?
The total direct material cost variance is $1,020 adverse, because actual cost of $13,020 (3,100 kg at $4.20) exceeds the standard cost of $12,000 for 1,000 units (3 kg at $4 each).
- A$1,020 adverseCorrect
- B$620 adverse
- C$400 favourable
- D$1,020 favourable
Explanation
Standard cost for 1,000 units = 1,000 x 3 x $4 = $12,000. Actual cost = 3,100 x $4.20 = $13,020. Total variance = $1,020 adverse. The price variance is 3,100 x $0.20 = $620 adverse and usage is 100 kg x $4 = $400 adverse; $620 alone ignores usage.
Did you get it right without looking?
One question tells you little. A timed set on Standard costing system shows your real accuracy, how long you take and where you lose marks.
More Standard costing system questions
- Which standard is most likely to be used on a standard cost card if management wants the standards to motivate employees to achieve a stretc…
- Dunmore Ltd has a standard of 3 kg of material per unit at $5 per kg. In March it produced 2,000 units and used 6,300 kg of material, which …
- Standard material usage is 3 kg per unit at $4 per kg. In a period 2,000 units were produced using 6,300 kg of material, purchased and used …
- Harlan Co uses standard absorption costing with fixed overheads absorbed on direct labour hours. Budget: 10,000 units, 2 hours per unit, fix…
- Keswick Co budgeted sales of 4,000 units at a standard selling price of $50 and a standard variable cost of $30 per unit. Actual sales were …
- Zeta Co budgeted to produce 5,000 units at a standard material cost of 3 kg per unit at $4 per kg. Actual output was 5,400 units, using 16,5…