Split materials variance into price and usage
Calculate material price and usage variances and assign the right follow-up question.
Standard is 4 pounds per unit at $5.00. Actual output is 3,000 units. Actual usage is 12,800 pounds. Actual price is $5.40. Split materials variance into price and usage so the follow-up matches the driver. Do not send the total variance to one team without splitting price and usage; that creates blame instead of diagnosis. Step 1 Standard quantity allowed = 3,000 units x 4 pounds = 12,000 pounds. Usage variance compares actual quantity to the quantity allowed for actual output. Step 2 Price variance = 12,800 x ($5.40 - $5.00) = $5,120 unfavorable. The company paid $0.40 more per…
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