ExpertHard2 marksShort Answer
ACCA · Question 27 · Standard Costing
A smartphone assembler set an original standard price for microchips at $5.00 per unit. Due to a global shortage, the market price unavoidably rose, and management revised the standard price retrospectively to $5.50 per unit.
During the period, 6,000 microchips were purchased and used.
Calculate the material price planning variance. State your answer as a number followed by 'A' or 'F' (e.g., 3000 A).
A smartphone assembler set an original standard price for microchips at $5.00 per unit. Due to a global shortage, the market price unavoidably rose, and management revised the standard price retrospectively to $5.50 per unit.
During the period, 6,000 microchips were purchased and used.
Calculate the material price planning variance. State your answer as a number followed by 'A' or 'F' (e.g., 3000 A).
How to approach this question
1. Find the difference between the Original Standard Price and the Revised Standard Price. 2. Multiply this difference by the Actual Quantity purchased/used.
Full Answer
Planning variance measures the effect of uncontrollable market changes.
Original Standard Price = $5.00
Revised Standard Price = $5.50
Difference = $0.50 Adverse (because the revised price is higher, meaning costs increased).
Planning Variance = Difference × Actual Quantity = $0.50 × 6,000 = $3,000 Adverse.
Common mistakes
Calculating an operational variance by comparing actual price to revised standard price.
Practice the full ACCA MA — Management Accounting Practice Exam 4
38 questions · hints · full answers · grading
More questions from this exam
Q01A global environmental NGO is planning its resource allocation for the next five years to combat ...EasyQ02A fintech startup is analyzing data to determine the viability of launching a new micro-lending a...EasyQ03A public water utility incurs a base maintenance cost of $10,000 per month for up to 5,000 gallon...MediumQ04An agricultural cooperative produces organic fertilizer. Which of the following costs would be cl...MediumQ05A cross-border logistics company uses an additive time series model to forecast shipping volumes....Medium