Question 1

SECTION B - MULTI-TASK QUESTION 2 (STANDARD COSTING)

Scenario: AgriGenetics produces a specialized liquid fertilizer. 
Standard cost card per 100 liters of output:
- Material X: 60 liters at $5 per liter
- Material Y: 50 liters at $8 per liter
(Note: Standard input is 110 liters to yield 100 liters of output, a 10% standard loss).
- Standard Labor: 2 hours at $20 per hour.

Actual results for the month:
- Output produced: 1,000 liters (requires 10 standard batches of 100 liters).
- Material X used: 650 liters, purchased and used at a total cost of $3,120.
- Material Y used: 450 liters, purchased and used at a total cost of $3,825.
- Labor: 22 hours worked, total cost $418.

Calculate the following 5 variances:
1. Total Material Price Variance
2. Total Material Mix Variance
3. Total Material Yield Variance
4. Labor Rate Variance
5. Labor Efficiency Variance

Select the option that correctly identifies all 5 variances.

Accepted Answer

1. Price Var = (Std Price - Act Price) * Act Qty. 2. Mix Var = (Actual total qty in std mix - Actual total qty in actual mix) * Std Price. 3. Yield Var = (Std total qty for actual output - Actual total qty) * Std weighted average price. 4. Labor Rate = (Std Rate - Act Rate) * Act Hours. 5. Labor Eff = (Std Hours - Act Hours) * Std Rate.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the mix variance backwards (thinking using more of X is bad, but X is actually the cheaper material, so using more X and less Y creates a favorable mix variance).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 1

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