Question 1

Section B - Case 3: UrbanTransit

UrbanTransit operates a fleet of municipal buses. The company uses a standard costing system to monitor fuel costs.

At the start of the year, the original standard price for diesel was set at $2.00 per liter. 
Mid-year, due to a global geopolitical shock, the market price of diesel surged. Management revised the standard price to $2.50 per liter to reflect uncontrollable market conditions.

During the last quarter, UrbanTransit purchased and used 100,000 liters of diesel at an actual total cost of $260,000.

Calculate the TOTAL material price variance (ignoring the revision for this specific calculation). State the number only, representing an adverse variance.

Accepted Answer

Total Price Variance = (Original Standard Price - Actual Price) * Actual Quantity.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using the revised standard ($2.50) to calculate the total variance instead of the original standard.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA PM — Performance Management Practice Exam 1

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