ACCA Applied Skills · Performance Management · Standard costing
Kestrel Ltd budgeted to use 4,000 kg of material at a standard price of $5.00 per kg. It actually bought and used 4,200 kg at a cost of $20,160. What is the material price variance?
The material price variance is $840 favourable, because 4,200 kg should have cost $21,000 at the standard price of $5 per kg but actually cost $20,160, which is $840 less than expected.
- A$840 adverse
- B$840 favourable
- C$960 adverseCorrect
- D$1,000 favourable
Explanation
Actual quantity at standard price = 4,200 x $5 = $21,000. Actual cost is $20,160. The difference is $840 favourable. Recheck: 21,000 - 20,160 = 840, so the price variance is favourable, not adverse.
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