ACCA Applied Skills · Performance Management · Standard costing
Dunmore Co's standard is 3 kg of material per unit at $5 per kg. Actual output was 1,200 units, using 3,750 kg of material. What is the material usage variance?
The usage variance is $750 adverse. Output of 1,200 units should use 3,600 kg, but 3,750 kg were used, an excess of 150 kg. Valued at the standard price of $5 per kg, the excess usage costs $750.
- A$750 adverseCorrect
- B$750 favourable
- C$3,750 adverse
- D$150 adverse
Explanation
Standard usage for 1,200 units is 3,600 kg. Actual usage was 3,750 kg, so 150 kg excess x $5 = $750 adverse. Option D omits the standard price.
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