ABC Limited uses a standard costing system for all its products. ABC Limited produces shirts. Each shirt uses a standard 3 metres of material at a standard cost of £5.50 per metre. Budgeted production is 5,000 shirts per annum. During the financial year ended 30 April 2019, ABC produced 5,500 shirts. The cost of each metre of material was £5.30 and 2.8 metres of material were used in each shirt produced. Based on the above information, what is the direct material total variance for the year ended 30 April 2019?
A) £3,080 Favourable
B) £5,830 Favourable
C) £6,050 Favourable
D) £9,130 Favourable

Question

Quizplus · Accepted Answer

The direct material total variance is calculated as the difference between the standard cost of actual production and the actual cost. Standard cost = 5,500 shirts * 3 metres/shirt * £5.50/metre = £90,750. Actual cost = 5,500 shirts * 2.8 metres/shirt * £5.30/metre = £81,620. Variance = £90,750 - £81,620 = £9,130 Favourable.

ABC Limited Uses a Standard Costing System for All Its