[amp_mcq option1=”Standard cost of materials – actual cost of materials” option2=”Budgeted cost of materials – actual cost of materials” option3=”Standard cost of materials – budgeted cost of materials” option4=”Actual cost of materials – budgeted cost of materials” correct=”option1″]<\/p>\n
The correct answer is: A. Standard cost of materials – actual cost of materials.<\/p>\n
The total material cost variance is the difference between the actual cost of materials used and the standard cost of materials that should have been used. The standard cost of materials is based on the quantity of materials that should have been used, at the standard price per unit of material. The actual cost of materials is the actual quantity of materials used, at the actual price per unit of material.<\/p>\n
The total material cost variance can be divided into two components: the price variance and the usage variance. The price variance is the difference between the actual price per unit of material and the standard price per unit of material, multiplied by the actual quantity of materials used. The usage variance is the difference between the actual quantity of materials used and the standard quantity of materials that should have been used, multiplied by the standard price per unit of material.<\/p>\n
The total material cost variance can be used to identify areas where costs are out of control. The price variance can be used to identify whether the company is paying too much for materials. The usage variance can be used to identify whether the company is using too much material or whether there is a problem with the production process.<\/p>\n","protected":false},"excerpt":{"rendered":"
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