Question

QUESTION 5

Information:

A standard quantity of 2kg of material X at a standard price of R4 per kg is allowed for the production of one unit of product Messi. The cost figures for the first quarter of 2020 showed that 4 400 kg of material X was purchased at R4.10 per kg.

2000 units of product Messi were produced using 4 200 kg of material X.

Required:

In respect of material, calculate and briefly comment on the following variances:

5.1 Material Purchase price variance.

5.2 Material Issue price variance.

5.3 Material Quantity variance.

5.4 Total material variance for the 4 200 kg of material issued.

Answer 1

Actual Material Purchased, AQP	4400 Kgs
Actual Material Used, AQI	4200 Kgs
Actual price per kg of material, AP	R 4.10
Standard Quantity for actual output, SQ	4000 Kgs	(2000*2)
Standard Price per kg of material, SP	R 4

Requirement 5.1:

Material Purchase Price Variance

= (AP – SP) * AQP

= (4.10 – 4) * 4400

= $440 A

Requirement 5.2:

Material Issue Price Variance

= (AP – SP) * AQI

= (4.10 – 4) * 4200

= $420 A

Requirement 5.3:

Material Quantity Variance

= (SQ - AQI) * SP

= (4000 – 4200) * 4

= $800 A

Requirement 5.4:

Total Material Variance

= (SQ * SP) – (AQI * AP)

= (4000 * 4) – (4200 * 4.1)

= $16000 - $17220

= $1220 A