CAF-5 · Chapter 18 · Question 18 of 20
(Standard Costing: Working Backwards for Material Price) Price Variance is Rs. 12,000 Adverse. Usage Variance is Rs. 8,000 Favourable. Std cost for actual production was Rs. 200,000 (Std Qty = 10,000 kg). What was the actual price paid per kg?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 21.25
Explanation
Std Price (SP) = 200k/10k = Rs. 20. Usage Variance = (10k - AQ) * 20 = 8,000 Fav -> 400 = 10k - AQ -> AQ = 9,600 kg. Price Variance = (20 - AP) * 9,600 = -12,000 Adv -> -1.25 = 20 - AP -> AP = Rs. 21.25.
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