ExpertMedium2 marksMultiple Choice
ACCA · Question 27 · Standard costing
A specialized bakery set a standard to use 2 kg of organic flour per cake at a standard price of $5 per kg.
During the month, they produced 1,000 cakes. They purchased and used 2,200 kg of flour at a total cost of $10,560.
What is the material usage variance?
A specialized bakery set a standard to use 2 kg of organic flour per cake at a standard price of $5 per kg.
During the month, they produced 1,000 cakes. They purchased and used 2,200 kg of flour at a total cost of $10,560.
What is the material usage variance?
Answer options:
A.
$1,000 Favorable
B.
$1,000 Adverse
C.
$440 Favorable
D.
$560 Adverse
How to approach this question
Usage variance = (Standard Quantity for actual production - Actual Quantity) * Standard Price.
Full Answer
B.$1,000 Adverse✓ Correct
Standard quantity for 1,000 cakes = 1,000 * 2 kg = 2,000 kg.
Actual quantity used = 2,200 kg.
Difference = 200 kg (Adverse, because they used more).
Usage variance = 200 kg * $5/kg = $1,000 Adverse.
Common mistakes
Multiplying the quantity difference by the actual price instead of the standard price.
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