MANAGEMENT ACCOUNTING DECISION & CONTROL

Hi
Is anyone explain the question?

The product being made by Tesco Ltd is budgeted to use 1.25 kg of material per unit at a cost of £7.80 per kg. During last month the company used 1140 kg to manufacture 950 units and the material price variance was £912 adverse. What is the actual price per kg of material? *

Thanks

Answers

  • Pian32
    Pian32 MAAT Posts: 461
    It's been a while since I've done this but I'm fairly sure it's like this:

    Budgeted price of actual amount used = 1.2*7.8*950 = £8892
    Actual price of actual amount used = X
    Variance = -£912

    8892 - X = -912

    X = 9804

    Price per kilo = 9804/1140 = £8.60


    For these questions you need to work out what you are comparing. If it's price you need to fix the amount used and compare against the actual amount. If it's amount used you compare against the standard amount.

    I always find the best way is to layout what you have and then work from there.
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  • Amna
    Amna Registered Posts: 21
    Thanks for the answers
    material is 1.25 kg, can we round up 1.2?
  • Amna
    Amna Registered Posts: 21
    Hi

    is anyone know how to approach this question
    The direct labour efficiency variance has been accurately calculated for the production of 2000 units in week 9 as £450 Adverse. The production took 445 hours. The standard labour time to make one unit is 12 minutes. What is the standard labour rate per hour?

    Thanks
  • Pian32
    Pian32 MAAT Posts: 461
    Amna said:

    Thanks for the answers
    material is 1.25 kg, can we round up 1.2?

    There is no rounding the 1.25kg is the budgeted amount the 1.2kg is the actual amount used per unit. (1140/950=1.2)
    AAT Level 4, MAAT
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    F4- Passed Aug 2020
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  • Pian32
    Pian32 MAAT Posts: 461
    Similar question to before but lightly more complicated.

    y = standard labour rate per hour

    Standard rate @ Actual time = 445y
    Standard rate @ standard time = 12/60 x 2000 x y = 400y
    Variance = -450

    Efficiency so equation is

    Standard rate @ standard time - standard [email protected] actual time = variance

    400y - 445y = -450
    y(400-445) = -450
    y = -450 / (-45)
    y= £10

    If you accidentally flip the figures you can think whether it makes sense to check. Variance was adverse so the expected time (standard) must have been lower than the actual time.
    AAT Level 4, MAAT
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    F4- Passed Aug 2020
    F5- Passed Dec 2020
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  • Amna
    Amna Registered Posts: 21
    Thank you so much Pian

    where can I study this topic, I am struggling with how to attempt questions?
  • Pian32
    Pian32 MAAT Posts: 461
    I'd start with the budgeting module that has variances and introduces them in a nicer way before it gets more complicated in decision and control.

    I'm sure there will be some videos about it online as well. What materials do you have access to I might be able to point you to the correct part of those?
    AAT Level 4, MAAT
    ACCA in progress
    F4- Passed Aug 2020
    F5- Passed Dec 2020
    F6- Passed Sep 2020
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    F8 - Passed Sep 2021
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    ATX - Planned Dec 21
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