Jurong Bhd operates the standard costing system. The standard/budgeted material costs for producing 400 litres of cooking
Question:
Jurong Bhd operates the standard costing system. The standard/budgeted material costs for producing 400 litres of cooking oil are as follows:
Materials | Quantity (litre) | Unit Cost (RM) | Amount (RM) |
A | 100 | 2 | 200 |
B | 250 | 1 | 250 |
C | 150 | 3 | 450 |
Total | 500 | 900 |
In January, the company produces 4,000 litres of cooking oil and the actual usage and the cost of the materials are as follows:
Materials | Actual Usage (litre) | Actual Purchase (litre) | Unit Cost (RM) |
A | 1,500 | 2,000 | 2.2 |
B | 3,000 | 4,000 | 1 |
C | 1,500 | 2,000 | 2.8 |
Total | 6,000 | 8,000 |
In addition, Jurong Bhd had budgeted to sell 180,000 of its product at a price of RM8; this would give a standard contribution of RM2 per unit. The sales budget had been based on holding its market share in a total market of 3.6 million high quality cooking oil.
After the end of the year, Jurong Bhd found that it had sold 176,000 units of cooking oil at an average price of RM7.50, but that the total market had been 3.5 million.
Required:
- Calculate the materials mix variance and materials usage variance.
- Calculate the sales price and volume variances. Then split the sales volume variance into market size and market share variance.
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins