Part I $15$ Marks

The following standards have been established for a raw material used in the production of product G$13$:

$$

Standard quantity of the material per unit of output

$2\mathrm{.}4$ liters

Standard price of the material

$$17\mathrm{.}00$ per liter

The following data pertain to a recent month's operations:

Actual material purchased

$5,600$ liters

Actual cost of material purchased

$$99,400$

Actual material used in production

$4,885$ liters

Actual output

$2,030$ units of product G$13$

$$

Calculate:

Answer in the booklet provided.

I.$$The material price variance

The Material Price Variance measures the difference between the actual cost of the material and what the cost should have been based on the standard price. It is calculated as follows:

MPV $=($Actual Price per Liter $$ Standard Price$)\backslash$times Actual Quantity Purchased

$\{$MPV$\}=($Actual Price per Liter $-$ Standard Price$)$ x Actual Quantity Purchased

MPV$=($ Actual Price per Liter$$Standard Price $)\backslash$times Actual Quantity Purchased

First, calculate the Actual Price per Liter:

Actual Price per Liter$=$Actual Cost of Material Purchased$/$Actual Material Purchased

Actual Price per Liter$=99,400/5,600=17\mathrm{.}75$

Now, calculate the Material Price Variance:

MPV$=(17\mathrm{.}7517\mathrm{.}00)\backslash$times $5,600$

MPV$=0\mathrm{.}75\backslash$times $5,600=4,200$

Since the actual price per liter $($$$17\mathrm{.}75)$ is higher than the standard price $($$$17\mathrm{.}00),$ the variance is unfavorable.

II$.$The material quantity variance

The Material Quantity Variance measures the difference between the actual quantity of material used and the standard quantity that should have been used for the actual output. It is calculated as follows:

Standard Quantity for Actual Output$=$Standard Quantity per Unit$\backslash$times Actual Outpu

Standard Quantity for Actual Output$=2\mathrm{.}4\backslash$times $2,030=4,872$

MQV$=($Actual Quantity Used$$Standard Quantity for Actual Output$)\backslash$times Standard Price

MQV$=(4,8854,872)\backslash$times $17\mathrm{.}00$

MQV$=13\backslash$times $17\mathrm{.}00=221$

Since the actual quantity used $(4,885$ liters$)$ is more than the standard quantity $(4,872$ liters$),$ the variance is unfavorable.

$Is$ this correct?