AAT level 4 MABU assessment 2 task 7c,d

JustynaKo

Hi guys
I've been staring at this question for an hour now and still can't work it out...

The following information has been extracted from the accounts of B Ltd for month two.
Actual output 10,000 units
Material cost variance £6,000 A
Material price variance £3,000 F
Standard usage per unit 2 kg
Standard price per kg £3
c) - Select the material usage variance from the following options.
£

- How many kgs were actual usage variance from the following operations.
kg

B Ltd rents a werehouse at a cost of £500,000 per year. The folowing additional information is also avaiable.
Actual capacity of existing warehouse 750,000 units
Actual cost of each additional warehouse unit £150,000
Actual capacity of each additional warehouse unit 100,000 units
Additional fee for each additional warehouse unit £5,000
The production budget for next year will be 960,000 units.
d) Calculate the budget rental cost for next year.
£

Pian32

For c)
Material Cost variance = Material Price variance + Material usage variance
Material usage = Material Cost - Material Price
= -6000 - 3000
= -9000 or 9000 Adverse
Material usage = (standard use - actual use) * standard price per unit
-9000 = (20000 - Actual use) * 3
Actual use = 20,000+3000
= 23,000 kg for 10,000 units or 2.3 kg per unit.

For d)

You need 960,000 units and existing covers 750,000. 960000-750000 = 210,000
There for you need to budget for 3 additional warehouses to cover the difference.
Extra cost = 3* 155,000

Total expected cost = £965,000

I might have messed up as it's been a while since I've touched variances but this should help.

JustynaKo

Great thank you -:)