Question 1

SECTION B - MULTI-TASK QUESTION 2 (STANDARD COSTING)

Scenario: AeroParts Inc manufactures specialized titanium components for the aerospace industry. The standard cost card for one component (Component T) is as follows:
- Material A: 3 kg at $40 per kg
- Material B: 2 kg at $50 per kg
- Direct Labor: 4 hours at $25 per hour

During October, AeroParts produced 1,000 units of Component T. The actual results were:
- Material A used: 3,200 kg costing $131,200
- Material B used: 1,900 kg costing $91,200
- Direct Labor: 4,100 hours costing $106,600

Answer the following 5 sub-questions (2 marks each):

1. Calculate the total material price variance for Material A.
2. Calculate the material usage variance for Material B.
3. Calculate the direct labor rate variance.
4. Calculate the direct labor efficiency variance.
5. If a global shortage caused the market price of Material A to rise to $42 per kg before the period started, what would be the material planning price variance for the actual quantity purchased?

Accepted Answer

Use standard variance formulas. Price variance = (Std Price - Act Price) * Act Qty. Usage variance = (Std Qty - Act Qty) * Std Price. Rate variance = (Std Rate - Act Rate) * Act Hours. Efficiency variance = (Std Hours - Act Hours) * Std Rate. Planning variance = (Original Std Price - Revised Std Price) * Act Qty.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Mixing up standard and actual quantities when calculating price variances.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 2

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