ACCA Applied Knowledge · Management Accounting · Standard costing system
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 16,500 kg of material costing $64,350. What is the material usage variance?
The material usage variance is $1,200 adverse. Standard usage for the 5,400 units actually produced is 16,200 kg, but 16,500 kg were used. The 300 kg excess valued at the standard price of $4 per kg gives $1,200 adverse.
- A$1,200 adverseCorrect
- B$1,200 favourable
- C$4,800 adverse
- D$3,900 favourable
Explanation
Standard usage for actual output = 5,400 x 3 = 16,200 kg. Actual usage was 16,500 kg, so 300 kg excess x $4 = $1,200 adverse. Using the budgeted output of 5,000 units (15,000 kg) would wrongly give a $6,000 adverse figure, and the price variance is a separate calculation.
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