The Standard Cost Card for a batch of 3,000 bottles of shampoo includes the following:
1,500 litres of liquid S at £0.30 per litre
1)5kg of powder P at £1.20 per kg
A batch of 3,000 bottles had the following usage:
1,700 litres of liquid S which cost £476 and 1.2kg of powder which cost £1.80
What are the material price and usage variances for the liquid?
A) The Usage Variance is £30 Favourable and the Price Variance is £56 Adverse
B) The Usage Variance is £56 Adverse and the Price Variance is £30 Favourable
C) The Usage Variance is £60 Adverse and the Price Variance is £34 Favourable
D) The Usage Variance is £34 Adverse and the Price Variance is £60 Favourable

Question

Quizplus · Accepted Answer

More liquid was used than expected. 200 litres at a standard cost of 30p = £60But the price was lower than expected. 1,700 litres at a saving of 2p = £34One method of calculating variances is as follows:Standard Qty x Standard Price 1,500 x 0.30 450Difference is Usage Variance 60 AdverseActual Qty x Standard Price 1,700 x 0.30 510Difference is Price Variance 34 FavActual Qty x Actual Price 1,700 x 0.28 476

The Standard Cost Card for a Batch of 3,000 Bottles