Rudolph makes large sheets of insulation foam for industrial use and has used a reliable supplier of chemicals for many years. The standard cost card for 100 metres of foam sheet contains the following in respect of chemicals: 1.5 litres at £28 per litre = £42 A week before the start of October, the supplier announced that it was closing down and Rudolph had to find a replacement supplier at short notice. Although it managed to do so, the quality of the chemical was better than their original supplier and the price quoted was therefore 4% greater than the previous price paid. In October, Rudolph produced the equivalent of 9,000 sections of 100 metre foam sheets and used 13,000 litres at a total cost of £370,000 Required: Calculate the material price and usage variance, without reference to the manager’s explanation. Split the material price variance into a planning and an operating part.
Rudolph makes large sheets of insulation foam for industrial use and has used a reliable supplier of chemicals for many years. The standard cost card for 100 metres of foam sheet contains the following in respect of chemicals: 1.5 litres at £28 per litre = £42 A week before the start of October, the supplier announced that it was closing down and Rudolph had to find a replacement supplier at short notice. Although it managed to do so, the quality of the chemical was better than their original supplier and the price quoted was therefore 4% greater than the previous price paid. In October, Rudolph produced the equivalent of 9,000 sections of 100 metre foam sheets and used 13,000 litres at a total cost of £370,000 Required: Calculate the material price and usage variance, without reference to the manager’s explanation. Split the material price variance into a planning and an operating part.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rudolph
Rudolph makes large sheets of insulation foam for industrial use and has used a reliable supplier of chemicals for many years. The
1.5 litres at £28 per litre = £42
A week before the start of October, the supplier announced that it was closing down and Rudolph had to find a replacement supplier at short notice. Although it managed to do so, the quality of the chemical was better than their original supplier and the price quoted was therefore 4% greater than the previous price paid.
In October, Rudolph produced the equivalent of 9,000 sections of 100 metre foam sheets and used 13,000 litres at a total cost of £370,000
Required:
- Calculate the material price and usage variance, without reference to the manager’s explanation.
- Split the material price variance into a planning and an operating part.
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