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PP Ltd operates a standard absorption costing system The following information has beenextracted from the

Question

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.

Required

1 Calculate the material price planning variance.

2 Calculate the operational material usage variance.

Managerial Accounting

PP Ltd operates a standard absorption costing system The following information has beenextracted from the