ACCA Applied Knowledge · Management Accounting · Standard costing system
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 at $3.90 per kg. What is the material usage variance?
The material usage variance is $1,200 adverse. Output of 2,000 units should have used 6,000 kg, but 6,300 kg were used, which is 300 kg excess. Valuing the excess at the standard price of $4 per kg gives $1,200, and it is adverse.
- A$1,200 adverseCorrect
- B$630 favourable
- C$1,200 favourable
- D$630 adverse
Explanation
Standard usage for 2,000 units = 6,000 kg. Actual usage = 6,300 kg, so 300 kg excess. Valued at standard price $4 gives $1,200 adverse. The $630 options use the actual price, which is incorrect for a usage variance.
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