Question in Accounting Traditional variance Analysis

1. Managing Director of Petro-KL Ltd (PTKLL) thinks that Standard Costing has little to offer in the reporting of material variances due to frequent change in price of materials. PTKLL can utilize one of two equally suitable raw materials and always plan to utilize the raw material which will lead to cheapest total production costs. However, PTKLL is frequently trapped by price changes and the material actually used often provides, after the event, to have been more expensive than the alternative which was originally rejected. During last accounting period, to produce a unit of 'P' PTKLL could use either 2.50 Kg of 'PG' a or 2.50 kg of 'PD'. PTKLL planned to use 'PG' as it appeared it would be cheaper of the two and plans were based on a cost of 'PG' of 1.50 per kg. Due to market movements, the actual prices changed and if PTKLL had purchased efficiently the cost would have been: 'PG' 52.25 per kg; 'PD' 52.00 per kg Production of 'P' was 1,000 units and usage of 'PG' amounted to 2,700 Kg at a total cost of * 6,480/- Required CALCULATE the material variance for 'P' by: (1) Traditional Variance Analysis; and (ii) An approach which distinguishes between Planning and Operational Variances