Deadeye Ltd operates a standard costing system in which all stocks are valued at standard cost.

The standard direct material cost of one unit of product MS is £36, made up of 4.8 kg of material H at £7.50 per kg. Material H is used only in the manufacture of product MS. The following information relates to last month:

Required 1 Calculate the direct material price and usage variances for last month.
2 Prepare a statement that reconciles the actual cost of material H purchased with the standard material cost of actual production of MS for last month. The statement should incorporate the variances calculated in 1.
3 a Suggest ONE possible cause for EACH of the variances calculated in 1.
b Who should the direct material price variance be reported to, and why?

Transcribed Image Text:

Material H: Purchased 40 000 kg for Issued into production Finished output of MS 294 000 36 500 kg 7200 units