# CMA Study Group

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• #### 1.  on actual hrs used

Posted 24 days ago

The standard direct material cost per unit for a product is calculated as follows: 10.5 liters at \$2.50 per liter. Last month the actual price paid for 12,000 liters of material used was 4% above standard and the direct material usage variance was \$1,815 favorable. No inventory of material is held.

What was the actual production last month (in units)?

A.

726 units.

B.

1,142 units.

C.

1,212.

D.

1,188 units.

• #### 2.  RE: on actual hrs used

Posted 24 days ago

Price per unit 10.5 * 2.5 = 26.25
Standard cost for actual production = 12000*2.5
=30,000
Variance =1815
Actual production = 30000+1815 =31815 /26.25 =1212

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Accountant
Abudhabi
United Arab Emirates
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• #### 3.  RE: on actual hrs used

Posted 2 days ago
Hi

1212 is the correct option

When there is a favourable Material Usage variance indicated at \$1815, it shows that the actual usage of input is lower than the standard (expected) usage for actual production. From 1815\$ being a favourable variance, it gives the impression that 1815 is a product of saved resources of input (in litres) x 2.5. Input saved is 726 litres against the actual usage of 12000 litres.  Standard Usage is expected to be 12726 litres. For every unit of Finished goods 10.5 litres the company is fixed. From this one can easily conclude that the actual production is 1212 units 12726/10.5

L.Muralidharan
6383228202
Chennai