028. Budget for May 40,000 units Actuals for May 40,500 units Output Sales Raw m
ID: 2562538 • Letter: 0
Question
028. Budget for May 40,000 units Actuals for May 40,500 units Output Sales Raw materials Labour I Overheads $ 400,000 80,000 $ 200,000 225,000 $ 406,000 $ 88,000 $ 180,000 305,000 Refer to the table above. The variance in raw materials from budget can best be described as: A. an adverse variance resulting from selling more units than budget. B. a positive variance resulting from efficient use of raw materials. C. an adverse variance resulting from excessive use of raw materials. D. an adverse variance resulting from excessive use of raw materials and/or an increase in the price of the raw material. E. None of the above.Explanation / Answer
Answer D: An adverse variance resulting from excessive use of raw material and or an increase in price of raw material
The explanation is as follows:
Budgeted output = 40,000 units
Budgeted material cost $80,000
Std material cost per unit $ 2 per unit (80,000/40,000)
Actual production =40,500 units
Std material cost for actual production =(40,500 *2) = $81,000
But, Actual material cost $ 88,000
Therefore, this may be due to any factor of material i.e. quantity consumed or price of raw material
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