PP Ltd operates a standard absorption costing system. The following information has been
extracted from the
standard cost card for one of its products:
Budgeted production 1500 units
Direct material cost: 7 kg × £4.10 £28.70 per unit
Actual results for the period were as follows:
Production 1600 units
Direct material (purchased and used): 12 000 kg £52 200
It has subsequently been noted that due to a change in economic conditions the best price that the material could have been purchased for was £4.50 per kg during the period.
1 Calculate the material price planning variance.
2 Calculate the operational material usage variance.
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