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Standard quantity 500 kg at 20 per kg, actual 520 kg at 20 per kg. The material usage variance is
A400 adverse
B400 favourable
C10,400 adverse
D20 adverse
Answer & Solution
Correct answer: A. 400 adverse
1. Price is identical at 20 per kg, so the whole difference is a usage effect.
2. Usage variance = standard price x (standard quantity less actual quantity).
3. = 20 x (500 - 520) = 20 x (-20) = -400.
4. A negative figure means more material was consumed than standard allowed, so 400 adverse.
5. Quoting 20 adverse confuses the quantity difference with its money value.
_Source: ICAI Cost and Management Accounting Ch13 'Standard Costing', section 13.7.1(B)_
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