Question

AAA Export Company’s actual production for March is 1,000 units. The standard cost for raw material #123 is $72 per unit consisting of 6 pounds per unit at $12 per pound. The actual cost for raw material #123 in March amounted to $71.50 per unit consisting of 6.5 pounds per unit at $11 per pound. The resulting budget variance for raw material #123 in March was therefore $500 F (1,000 units × ($72.00 − $71.50). What amount of AAA Export's $500 F budget variance in March is attributable to the quantity of raw material #123 used? A. 6000 F B. 6000 U C. 6500 F D. 6500 U

Answer 1

Answer

B. 6000 U

Explanation:

Standard Price	$           12
Standard quantity	6,000.00
Actual price	$           11
Actual Quantity	6,500.00

Material Quantity Variance = (Standard quantity-Actual Quantity)*Standard Price

Material Quantity Variance = (6,000-6,500)*$12

Material Quantity Variance = -6,000 or 6,000 (U)

In case of any doubt, please comment.