Using the same data (5,200 kg used to make 1,000 units, standard 5 kg per unit at £4.00 per kg, actual price £4.30), what is the material usage variance?
Answer and explanation
Correct answer: C. £800 adverse
- Step 1: Standard usage for 1,000 units = 5 kg × 1,000 = 5,000 kg.
- Step 2: Excess usage = 5,200 - 5,000 = 200 kg.
- Step 3: Usage variance = 200 kg × standard price £4.00 = £800, adverse because more was used than allowed.
Answer
£800 adverse.
Why not the others: Favourable would require less material than the standard. £860 values the excess kilograms at the actual price of £4.30. £1,560 is the price variance.
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