The cleaning company “Lightning Property Clean” estimates a usage of 1,150 liters of detergents for the next period. At the same time, average purchase price for detergents are expected to be €0.32/liter. At the end of the period, average purchase price was higher than expected and stood at €0.37/liter. Total consumption of detergents was 1,315 liters.
1. Calculate quantity and price variance.
2. Explain and show mathematically why the two variances do not add up to total cost variance.