# ECONOMICS

## COST ACCOUNTING

### RESPONSIBILITY ACCOUNTING

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
If the standard quantity of materials is 79, 200 units @ \$0.15 per unit and the actual quantity is 90, 000 units @ \$0.12 per unit then the total materials cost variance is:
 A 2, 700 Favorable B 2, 700 Unfavorable C 1080 Favorable D 1080 Unfavorable
Explanation:

Detailed explanation-1: -Standard Quantity for actual production: Material – A = 8/12 × 1, 200 kgs = 800 kgs. Material – B = 4/12 × 1, 200 kgs = 400 kgs. 2. Calculation of Revised Standard Quantity Actual Quantity at Standard mix) Material – A = 8/12 × 1, 260 kgs = 840 kgs.

Detailed explanation-2: -Formula to calculate standard costs Materials cost = market price per unit x total number of units. Manufacturing overhead = fixed overhead + (variable manufacturing overhead x total number of units)

Detailed explanation-3: -(standard quantity of material allowed for production – actual quantity used) × standard price per unit of material.

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