AMAC AAT task 3 paper 1

ChantelleGuest_1

Please can someone help me? I cannot work out how the materials price and usage are calculated. I can find the materials cost variance of £5420 but do not understand how the answers of £3420 and £2000 were reached for materials price, and materials usage.

PeterC

Usage:
To make 1,000,000 units they should have used 20,000 kg (1,000,000 x 0.02)
They actually used 19,000 kg (1,000,000 x 0.019)
The reduction of 1,000 kg should save £2,000 (1,000 kg x £2/kg)
This is the usage variance

Price:
The 19,000 kg they used should have cost £2/kg
It actually cost £1.82/kg
This is a saving of £0.18/kg, or £3,420 (0.18 x 19,000)


See also "Standard cost Variances 1"