ACCA MA · Chapter 12 · Question 7 of 10
A company bought 5,200 kg of material for $23,400 and used 4,800 kg of it in production. Raw material inventory is valued at standard cost. The material price variance was $1,560 favourable. What is the standard price per kg?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $4.80
Explanation
Because inventory is valued at standard cost, the price variance is calculated on the 5,200 kg purchased. A favourable variance means standard cost was more than actual cost. Standard cost of purchases = 23,400 + 1,560 = $24,960. Standard price = 24,960 / 5,200 = $4.80 per kg. Dividing by the 4,800 kg used gives $5.20, subtracting the variance gives $4.20, and $4.50 is the actual price paid.
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