Figure 17-2
Rax Company has developed the following standards for one of its products:
Direct materials
12 pounds * £14 per pound
Direct labour
3 hours * £18 per hour
Variable overhead
3 hours * £8 per hour
The following activities occurred during the month of October: $\begin{array}{ll}
\text { Materials purchased } & 10,000 \text { pounds at } £ 13.60 \text { per pound } \
\text { Materials used } & 9,000 \text { pounds } \
\text { Units produced } & 800 \text { units } \
\text { Direct labour } & 2,500 \text { hours at } £ 19.00 \text { per hour } \
\text { Actual variable overhead } & £ 22,000
\end{array}$ The company records materials price variances at the time of purchase.
-Refer to Figure 17-2. Rax's materials usage variance would be
A)£8,400 unfavourable.
B)£8,400 favourable.
C)£5,600 unfavourable.
D)£5,600 favourable.

Question

Quizplus · Accepted Answer

The materials usage variance is calculated as follows:Standard quantity of materials = 12 pounds per unit * 800 units = 9,600 poundsStandard price of materials = £14 per poundStandard cost of materials = 9,600 pounds * £14 per pound = £134,400Actual quantity of materials used = 9,000 poundsActual price of materials = £13.60 per poundActual cost of materials = 9,000 pounds * £13.60 per pound = £122,400Materials usage variance = Standard cost of materials - Actual cost of materials= £134,400 - £122,400= £8,400 favourable

Figure 17-2 Rax Company Has Developed the Following Standards for One

Figure 17-2
Rax Company Has Developed the Following Standards for One