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Green light test standard costing
Alaa
Registered Posts: 30
Best Answer

fedemenni Posts: 94the question asking you the total standard material cost (which means the budgeted quantity x price of the material) you need to see how much material is needed for each quantity, to find this out is 1020 (metres of raw material) divided by 850 units produced (budget because the business expects it)
the standard cost for each metre is given of £8.20.
Now that you have standard meter per unit you can calculate how many metres you will require to calculate the total standard material = 890 units x 1.2 meter per unit x £8.20 = £8757.60
hope it makes more sense.
Btw I am doing the same module1
Answers
If you are expected to use 1,020 metres of raw material to produce 850 units but you end up producing 890, then you have used more raw material. the calculation is 1,020 metres divided by 850 units times by 890 unit. This means that you actually used 1,068 metres of raw material.
The standard cost is £8.20 per metre times by 1,068 metres of raw material making the standard cost of production at £8,757.60