Budget for product A for a period is as follows:

 

Production2,000 units

Sales2,000 units: $15 per unit

Direct material cost6,000 kilos of XYZ: $2 per kilo

Direct labour cost4,000 hours: $2 per hour

Actual results for the period were as follows:

Production2,500 units

Sales 2,250 units:$15 per unit

Direct material cost5,000 kilos purchased and consumed at a total cost of $12,000

Direct labour cost6,000 hours at a total cost of $9,000

There were no opening stocks. It is company policy to value stocks at standard cost.

Required:

A. Calculate the following variances:

i.Material Cost Variance

ii.Material Price Variance

iii.Material Usage Variance

iv.Labour Efficiency Variance

v.Labour Rate Variance

vi.Labour Cost Variance

Can anyone explain why did they used the units produces to calulate the Material cost variances (Material Cost Variance = Standard Cost - Actual Cost

= 6000 * 2500/2000 * 2 - 12000

= 3000 Favorable)

and not times 6000 kilos by 2?'

because in actual results 5000 were purchaes and cosumers at a total cost of 12,000 so why standard cost isnt 6000 * 2?

can i get a full detail explanation ?

Answer rating: 100% (QA)

Id be happy to help you understand the material cost variances calculation Material Cost Variance MCV The Material Cost Variance MCV measures the diff... View the full answer