Math Problem Statement
Muriel Ltd has prepared the following standard data for the first quarter of 2024:
£ per unit
£ total @ 4,200 units
Sales
300.00
1,260,000
Less variable costs:
Materials (Note i)
(67.20)
(282,240)
Labour (Note ii)
(18.00)
(75,600)
Other variable overheads
(62.00)
(260,400)
Contribution
152.80
641,760
Less fixed overheads
(175,000)
Profit
466,760
The actual results for the first quarter of 2024, where 4,130 units were produced and sold, were as follows:
Sales
£1,263,780
Less variable costs:
Materials (Note iii)
(£223,020)
Labour (Note ii)
(£75,166)
Other variable overheads
(£226,800)
Contribution
£738,794
Less fixed overheads
(£182,000)
Profit
£556,794
Notes:
(i)Under the standard costing system, each unit produced and sold by the firm in the first quarter of 2024 will use 16kg of material.
(ii)Under the standard costing system, each unit produced and sold by the firm in the first quarter of 2024 will require 2.5 hours of labour. The actual number of labour hours needed per unit was the same for the first quarter of 2024.
(iii) In the first quarter of 2024, each unit produced and sold used 14.4kg of materials.
What is the materials usage variance for the first quarter of 2024? (to two decimal places)
Show answer choices
£27,753.60 Favourable
£26,762.40 Favourable
£59,220 Favourable
£32,457.60 Adverse
Solution
The Materials Usage Variance can be calculated using the formula:
Step 1: Gather information
-
Standard Quantity (SQ):
-
Actual Quantity (AQ):
-
Standard Price per kg (SP):
From the standard data, materials cost per unit is £67.20.
Step 2: Calculate variance
Final Answer:
£27,753.60 Favourable.
Let me know if you'd like more details or further clarification! Here are 5 related questions to expand your understanding:
- How would the materials price variance be calculated from the given data?
- What factors contribute to a favourable materials usage variance?
- How does the change in labour hours affect the variance calculation?
- What is the significance of analysing variance in standard costing systems?
- How can Muriel Ltd improve its materials planning process?
Tip: Always compare standard and actual results side by side to pinpoint areas of improvement in cost management.
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Math Problem Analysis
Mathematical Concepts
Variance Analysis
Standard Costing
Material Costing
Formulas
Materials Usage Variance = (Standard Quantity - Actual Quantity) × Standard Price per kg
Theorems
Materials Variance Analysis
Suitable Grade Level
Grades 11-12
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