ExpertMedium2 marksMultiple Choice
ACCA · Question 23 · Standard Costing
Section A
AgriGrow produces organic fertilizer. The standard material cost is $5 per kg. The standard yield is 90% of input. In June, 10,000 kg of material were input, and 8,800 kg of good output were produced. What is the material yield variance?
Section A
AgriGrow produces organic fertilizer. The standard material cost is $5 per kg. The standard yield is 90% of input. In June, 10,000 kg of material were input, and 8,800 kg of good output were produced. What is the material yield variance?
Answer options:
A.
$1,000 Favorable
B.
$1,000 Adverse
C.
$1,111 Adverse
D.
$6,000 Adverse
How to approach this question
Calculate expected output (90% of 10,000 = 9,000). Compare to actual output (8,800). The shortfall is 200 units. Multiply by the standard input cost ($5).
Full Answer
B.$1,000 Adverse✓ Correct
Expected output from 10,000 kg input = 9,000 kg. Actual output = 8,800 kg. There is a shortfall of 200 kg of output. Valued at the standard input cost of $5/kg, the variance is 200 * $5 = $1,000 Adverse.
Common mistakes
Calculating the variance as favorable, or using the wrong standard cost multiplier.
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