COST ACCOUNTING
RESPONSIBILITY ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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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:
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2, 700 Favorable
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2, 700 Unfavorable
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1080 Favorable
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1080 Unfavorable
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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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