A specialized bakery set a standard to use 2 kg of organic flour per cake at a standard price of $5 per kg.
During the month, they produced 1,000 cakes. They purchased and used 2,200 kg of flour at a total cost of $10,560.

What is the material usage variance?

Answer options:

$1,000 Favorable

$1,000 Adverse

$440 Favorable

$560 Adverse

How to approach this question

Usage variance = (Standard Quantity for actual production - Actual Quantity) * Standard Price.

Full Answer

B.$1,000 Adverse✓ Correct

Standard quantity for 1,000 cakes = 1,000 * 2 kg = 2,000 kg. Actual quantity used = 2,200 kg. Difference = 200 kg (Adverse, because they used more). Usage variance = 200 kg * $5/kg = $1,000 Adverse.

Common mistakes

Multiplying the quantity difference by the actual price instead of the standard price.

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