AAA Export Company's actual production for March is 1,000 units.The standard cost for raw material #123 is $72 per unit consisting of 6 pounds per unit at $12 per pound.The actual cost for raw material #123 in March amounted to $71.50 per unit consisting of 6.5 pounds per unit at $11 per pound.The resulting budget variance for raw material #123 in March was therefore $500 F (1,000 units × ($72.00 − $71.50). What amount of AAA Export's $500 F budget variance in March is attributable to the quantity of raw material #123 used?

Question

Quizplus · Accepted Answer

The variance attributable to the quantity of raw material used is calculated by comparing the actual quantity used to the standard quantity allowed. The actual quantity used was 6.5 pounds per unit, while the standard was 6 pounds per unit. The difference is 0.5 pounds per unit, which for 1,000 units is 500 pounds. At the standard cost of $12 per pound, this results in a $6,000 unfavorable variance (500 pounds x $12).

AAA Export Company's Actual Production for March Is 1,000 Units