In producing one unit of product A21, the following standard cost for materials has been set:
20 metres × £7.00 per metre = £140.00
However, recent production data show that the firm is using 24 metres @ £5.50 per metre in the production of one unit:
Total materials variance = Actual materials cost – Standard materials cost
|
Actual materials cost |
Standard materials cost |
Materials cost variance |
|
20 x £7 = £140 |
24 x £5.50 = £132 |
= £8 (Adverse) |