MANAGEMENT ACCOUNTING DECISION & CONTROL

Amna · October 2021

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

Pian32 · October 2021

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.

Amna · October 2021

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

Amna · October 2021

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 · October 2021

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)

Pian32 · October 2021

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 rate@ 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.

Amna · October 2021

Thank you so much Pian

where can I study this topic, I am struggling with how to attempt questions?

Pian32 · October 2021

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?

MANAGEMENT ACCOUNTING DECISION & CONTROL

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