Material Usage Variance question... HELP!

gabriellenlewis

So, i have been at this for hours and cannot seem to get the answer that is given (£6000).

A company purchases and uses 200,000 litres of material at a cost of £0.55 per litre.
The budgeted production was 22,000 units per 220,000 litres of material at standard cost of £132,000.
The actual production was 19,000 units.

What is the material usage variance?

douglasstroud

Hi

Budgeted production 132,000 / 220,000= .60 per litre
Budgeted for 10L per unit
So actual production of 19,000 should use 190,000 but actually used 200,000
So material usage variance is 10,000 x .60 = 6,000

Hope this helps
Doug

gabriellenlewis

Yes, that's great. Thank you! @douglasstroud