ParrotBird48516
Jun 25, 2012, 11:30 AM
If a company establishes that its per unit standard for its product is 3 kilograms of direct materials at $2 per kilogram, when you are calculating the materials price variance, do you use $2 as your standard price, or $6, as the unit standard was given as 3 kilograms.
My original take was to use the $6, but further reseach suggests that it is the per/pound amount that is used. I am not sure why this is the case if the standard given was 3 kilograms, but that is what the literature is leaning towards. Clarification is please requested.
The formula I am using is (actual - standard) x quantity purchased. Obviously, the answer varies quite a bit if the wrong value is used.
Thank you,
Parrot
My original take was to use the $6, but further reseach suggests that it is the per/pound amount that is used. I am not sure why this is the case if the standard given was 3 kilograms, but that is what the literature is leaning towards. Clarification is please requested.
The formula I am using is (actual - standard) x quantity purchased. Obviously, the answer varies quite a bit if the wrong value is used.
Thank you,
Parrot