Page 269 - PM Integrated Workbook 2018-19

Advanced variances

Example 2

Standard cost 2 kg at $10 per kg

Actual output 1,000 units

Materials purchased and used 2,250 kg

Material cost $20,500

Calculate

(i) Material price variance.

2,250 kg should have cost 2,250 × $10 $22,500
But did cost $20,500

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Material price variance $2,000 F

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(ii) Material usage:
1,000 units should have used 2,000 kg

But did use 2,250 kg

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Variance in kg 250 kg A
× standard price $10.00

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Material usage variance $2,500 A

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