During April, 80,000 units of product were produced. The standard quantity of material allowed per unit was two pounds at a standard cost of £5 per pound. If there was a favourable materials usage variance of £40,000 for April, the actual quantity of materials used must have been
A)168,000 pounds.
B)152,000 pounds.
C)84,000 pounds.
D)76,000 pounds.

Question

Quizplus · Accepted Answer

To calculate the actual quantity of materials used, we need to first calculate the standard cost of materials allowed for the production of 80,000 units.

Standard quantity of material allowed per unit = 2 pounds 
Number of units produced in April = 80,000 
Total standard quantity of materials allowed = 2 pounds x 80,000 units = 160,000 pounds

Standard cost of materials allowed = Standard quantity of material allowed x Standard cost per pound 
= 160,000 pounds x £5 per pound 
= £800,000

Now we can use the favourable material usage variance to calculate the actual cost of materials used:

Favourable materials usage variance = Standard cost of materials allowed - Actual cost of materials used 
£40,000 = £800,000 - Actual cost of materials used

Actual cost of materials used = £800,000 - £40,000 = £760,000

To find the actual quantity of materials used:

Actual cost of materials used = Actual quantity of materials used x Actual cost per pound 
£760,000 = Actual quantity of materials used x Actual cost per pound

We don't have the actual cost per pound, but we do have the standard cost per pound, so we can use that to find the actual quantity of materials used:

Actual quantity of materials used = Actual cost of materials used ÷ Standard cost per pound 
= £760,000 ÷ £5 per pound 
= 152,000 pounds

Therefore, the actual quantity of materials used must have been 152,000 pounds, which is answer choice B.

During April, 80,000 Units of Product Were Produced