actual usage of materials in the variance analysis
pirate
Registered Posts: 469
Hi there
I have been given the following information
materials std unit of input is 10 litres,
standard price per unit of imput is £2,
std cost per unit is £20,
std budgeted units of production (5000 units of 10 litres drums).
std cost of budgeted production £100,000
this says to me that there are 100 litres that go into a standard unit of production (a std unit being a 10 litres drum) therefore I see that 90 litres is wasted in production or something
Actual then is
£2.05 per unit of input (ie per 10 litres)
actual cost is £105,000
and what was actually produced was 4800 units
The question asks what was the actual usage of materials in litres.
Since it costs £2.05 for 10 litres then it follows it costs .205 p for 1 litres
so I divided £105,000 by /.205p to try to get the litres.
this comes out at an odd number
ie 512,195.12 litres
Am I calculating this correctly.
we are not told the actual amount of materials I need to calculate it.
If we calculate it should we be using the actual units produced to work out the actual usage and the costs are actually irrelevant.
as part of material usage variance calculation we need to
calculate the actual quantity used @ std price.
My question therefore is
is the actual quantity used in this calculation  the actual quantity used in production inlcuding any spilages or spoilt materials or just the actual stuff that went into the production (which we actually dont know)
many thanks
Karen
I have been given the following information
materials std unit of input is 10 litres,
standard price per unit of imput is £2,
std cost per unit is £20,
std budgeted units of production (5000 units of 10 litres drums).
std cost of budgeted production £100,000
this says to me that there are 100 litres that go into a standard unit of production (a std unit being a 10 litres drum) therefore I see that 90 litres is wasted in production or something
Actual then is
£2.05 per unit of input (ie per 10 litres)
actual cost is £105,000
and what was actually produced was 4800 units
The question asks what was the actual usage of materials in litres.
Since it costs £2.05 for 10 litres then it follows it costs .205 p for 1 litres
so I divided £105,000 by /.205p to try to get the litres.
this comes out at an odd number
ie 512,195.12 litres
Am I calculating this correctly.
we are not told the actual amount of materials I need to calculate it.
If we calculate it should we be using the actual units produced to work out the actual usage and the costs are actually irrelevant.
as part of material usage variance calculation we need to
calculate the actual quantity used @ std price.
My question therefore is
is the actual quantity used in this calculation  the actual quantity used in production inlcuding any spilages or spoilt materials or just the actual stuff that went into the production (which we actually dont know)
many thanks
Karen
0
Comments

From this isnt it only 10 litres that goes into 1 unit. Where are you getting 100 litres from?0

Hello,
Here's my attempt, not done standard costing for a while so someone else may need to verify my answer:
Standard Cost for 1 Unit = 10 litres @ £2 = £20
Total Material Cost Variance for actual production:
Standard: 4,800 Units @ £ 20 = 96,000
Actual:..............................= 105,000
Variance:............................= 9,000 (A)
With information we have we can work out the Material Price Variance:
Standard: 4,800 Units * 10 litres = 48,000 litres @ £2 = 96,000
Actual:......................................48,000 litres @ £ 2.05 = 98,400
Variance:...............................................................= 2,400 (A)
From above you can see that out of a total variance of 9,000 (A), 2,400 (A) was caused by Material price so therefore 6,600 (A) (9,000  2,400) must be caused my Material usage variance.
Material Usage Variance:
Standard 4,800 Units * 10 litres = 48,000 litres @ £ 2 = 96,000
Add: Adverse Material Usage Variance (as above):...... = 6,600
Total: £ 102,600
Materials actually used = £ 102,600 / £ 2 = 51,300 litres0 
Apologies, pls ignore above I think it is actually just as simple as £ 105,000 / £ 2.05 = 51,220 litres used.
Material Price Variance 2,560 (A) (51,220 * £2)  (51,220 * £2.05)
Material Usage Variance 6,440 (A) (48,000 * £2)  (51,220 * £2)
Total Material Variance 9,000 (A)
Sorry for any confusion0 
Hi Guys
yes I did 105000/.205 = 512195.12 litres
its £2.05 for 10 litres and they want to know how many litres were actually used.
I dont have the actual number only that 4800 were produced. usually we are given the actual litres used. So this is all I have. Its just that it works out so odd everything else in the question works out well
anyway guys thanks for that will go with this
Karen0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 18.9K For AAT students
 234 NEW! Qualifications 2022
 133 General Qualifications 2022 discussion
 7 AAT Level 2 Certificate in Accounting
 31 AAT Level 3 Diploma in Accounting
 55 AAT Level 4 Diploma in Professional Accounting
 8.9K For accounting professionals
 23 coronavirus (Covid19)
 272 VAT
 91 Software
 272 Tax
 135 Bookkeeping
 7.3K General accounting discussion
 201 AAT member discussion (AATQB, MAAT, FMAAT and AAT Licensed Accountants and Bookkeepers)
 3.8K For everyone
 39 AAT news and announcements
 352 Feedback for AAT
 2.8K Chat and offtopic discussion
 586 Job postings
 17 Who can benefit from AAT?
 36 Where can AAT take me?
 44 Getting started with AAT
 26 Finding an AAT training provider
 47 Distance learning and other ways to study AAT
 25 Apprenticeships
 65 AAT membership