MATERIAL USAGE VARIANCE QUESTION- please help...

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gabriellenlewis
gabriellenlewis Registered Posts: 129
in AAT Level 4 (Level 8 in Scotland)
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.

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  • richiebkerry
    richiebkerry Registered Posts: 45 Regular contributor ⭐
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    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
    gabriellenlewis Registered Posts: 129
    edited March 2016
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    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
    gabriellenlewis Registered Posts: 129
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    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
    richiebkerry Registered Posts: 45 Regular contributor ⭐
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    You didn't give a standard price, only actual?
  • gabriellenlewis
    gabriellenlewis Registered Posts: 129
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    Oh i'm sorry @richiebkerry , the total standard cost is £132,000... ?

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