During September, 40,000 units of product were produced. The standard quantity of material allowed per unit was four pounds at a standard cost of £6.00 per pound. If there was a favorable materials usage variance of £30,000 for April, the actual quantity of materials used must be
A) 41,250 pounds
B) 38,750 pounds
C) 165,000 pounds
D) 155,000 pounds

Question

Quizplus · Accepted Answer

The standard quantity of material for 40,000 units is 160,000 pounds (40,000 units * 4 pounds/unit). The standard cost is £6.00 per pound. A favorable variance of £30,000 means that the actual cost was £30,000 less than the standard cost for the actual quantity used. To find the actual quantity used, we calculate the standard cost for the standard quantity and subtract the variance. The standard cost for the standard quantity is £960,000 (160,000 pounds * £6.00). Subtracting the variance (£30,000) from the total standard cost gives us £930,000 as the cost for the actual quantity used. Dividing this by the standard cost per pound (£6.00) gives us 155,000 pounds as the actual quantity used.

During September, 40,000 Units of Product Were Produced