Question 1(2 points)

Elia Ltd has set the following direct material standards per unit of product: 2.5 kg @ $3.00 per kg.During April,actual direct material purchased and used amounted to 8000 kg at a total cost of $24,800. Actual production amounted to 3000 units.

Determine Elia's direct Material Price variance.(See formulas below)

Standard Costs Formulas as per your prescribed text book

PQ - Purchased Quantity; AP - Actual Price; SP - Standard Price; AQ - Actual Quantity; SQ- Standard Quantity; AR - Actual Rate; SR - Standard Rate; AH - Actual Hours;SH - Standard Hours

Material Variances

Direct MaterialPriceVariance (based on purchased quantity)= PQ(AP - SP)/(PQ x AP)-(PQ x SP)

Direct MaterialQuantityVariance = SP(AQ - SQ)/(AQ x SP) - (SQx SP)

Total Material Variance = Price + Quantity from above

Question 1 options:

a)$1,500 (U)

b)$800(U)

c)$750(U)

d)$700(U)