ICAEW BIP · Chapter 9 · Question 12 of 13
A company bought 7,000 kg of material for £31,500. The material price variance was £2,100 adverse. What is the standard price per kg?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) £4.20
Explanation
An adverse price variance means the actual cost was higher than the standard cost of the material bought. Standard cost of 7,000 kg = £31,500 - £2,100 = £29,400. Standard price = £29,400 / 7,000 = £4.20 per kg. Adding the variance would wrongly treat it as favourable.
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