Terra Plastics: variance analysis

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• Standard quantity for 1,000 boxes = 3 kg x 1,000 = 3,000 kg.
• Material price variance = (4.00 - 4.10) x 3,200 = $320 adverse.
• Material usage variance = (3,000 - 3,200) x 4 = $800 adverse.
• Total material variance = $1,120 adverse, which agrees with the standard cost of $12,000 and the actual cost of $13,120.
• The actual quantity bought is used for the price variance.
• F or A is stated for each variance.

Marks counted: 0 of 6

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• Standard hours for 1,000 boxes = 2 x 1,000 = 2,000 hours.
• Labour rate variance = (9.00 - 9.20) x 2,050 = $410 adverse.
• Labour efficiency variance = (2,000 - 2,050) x 9 = $450 adverse.
• Total labour variance = $860 adverse, which agrees with $18,000 less $18,860.
• The actual hours paid are used for the rate variance.
• F or A is stated for each variance.

Marks counted: 0 of 6

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• Standard contribution per box = 60 - 12 - 18 = $30.
• Sales price variance = (58 - 60) x 1,000 = $2,000 adverse.
• Sales volume contribution variance = (1,000 - 1,100) x 30 = $3,000 adverse.
• The standard contribution is used for the volume variance and the actual units for the price variance.

Marks counted: 0 of 4

Tick each point that your answer made clearly and only once. Points here are this site's own. A real examiner may accept other valid points.

• A material price rise may come from a change in the market or from buying small quantities, and an adverse usage variance may come from waste or poor quality.
• Adverse labour rate may come from overtime or skilled workers, and adverse efficiency may come from poor materials, machine faults or new staff.
• The variances may be linked: poor quality material may cause waste and slow work, so adverse usage and efficiency variances arise together.
• Lower sales may be linked to the price cut to $58, which may have been used to try to sell the boxes.

Marks counted: 0 of 4