Day: July 21, 2023

A business produces the following actual figures.

• Production – 210 units
• Quantity of direct material – 483 tonnes
• Total cost of direct materials – £1,449,000

A standard unit uses 2.25 tonnes of material at a price of £3,100 per tonne.

What are the usage and price variances?

Select ONE answer:

1. Usage – £32,550 ADV & Price – £48,300 FAV
2. Usage – £32,550 FAV & Price – £48,300 ADV
3. Usage – £176,700 ADV & Price – £48,300 FAV
4. Usage – £176,700 FAV & Price – £48,300 ADV

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Usage — > £1,449,000 – £1,464,750 (210 * 2.25 * £3,100) & Price — > £1,497,300 (483 tonnes * £3,100) – £1,449,000 = £48,300 FAV
2. Not correct
3. Not correct
4. Not correct

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