MATERIAL USAGE VARIANCE QUESTION- please help...

gabriellenlewis

A company purchases 200,000 litres of material at a cost of £0.55 per litre.

The budgeted production was 22,000 units which requires 220,000 litres of material.

The actual production was 19,000 units.

What is the material usage variance?

Please explain, thanks.

richiebkerry

Budget / Std = (220,000/22,000) thus 10 litres per unit.

If you made 19,000 units with the purchased 200,000 litres then your adverse 10,000 because it should have been 190,000 (10 litres x 19,000 units).

gabriellenlewis

Thanks for your response, @richiebkerry ...I thought the exact same but it's for one of the practice assessments and the answers say £6000?

gabriellenlewis

So with your answer, it would be £5500 if multiplied by the standard cost per unit (£0.55). But the answr is meant to be £6000, which i don't see how?! @richiebkerry

richiebkerry

You didn't give a standard price, only actual?

gabriellenlewis

Oh i'm sorry @richiebkerry , the total standard cost is £132,000... ?