Section B - Case 2: Verdant Yields
Verdant Yields produces organic liquid fertilizer by blending two materials: Nitrogen-rich (N) and Phosphorus-rich (P).
Standard data to produce 10 liters of fertilizer:
Material N: 8 liters at $5 per liter
Material P: 4 liters at $10 per liter
(Total standard input = 12 liters. Standard cost = $80).
Actual data for the month:
Output produced: 950 liters of fertilizer.
Material N purchased and used: 840 liters at $4.80 per liter.
Material P purchased and used: 360 liters at $10.50 per liter.
What is the Total Material Price Variance for the month?
ACCA · Question 25 · Budgeting and Control
Section B - Case 2: Verdant Yields
Verdant Yields is considering implementing Planning and Operational variances. It was discovered that the global market price for Material P unexpectedly spiked due to a mining shortage, causing the standard price of $10 to be highly unrealistic.
If Verdant Yields calculates Planning and Operational price variances, who should be held accountable for the Adverse Operational Price Variance?
Answer options:
The Purchasing Manager, for the entire difference between the original standard price and the actual price paid.
The Planning Department, for failing to predict the mining shortage.
The Purchasing Manager, but only for the difference between the revised standard price and the actual price paid.
The Production Manager, because they control the mix of materials used.
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