Submitted by: Submitted by nieldevilliers
Views: 289
Words: 265
Pages: 2
Category: Business and Industry
Date Submitted: 04/21/2013 11:58 PM
Calculate the total direct material price variance and quantity variance for March
Ingredients Lamb Dinner Fish Fillets Chips Mixed veggies
Standard price k/g 40 60 30 25
Actual price k/g 42 63 25 27
Standard quantities k/g
Lamb Dinner 0.2 0.15 0.25
Fish Dinner 0.35 0.3
Dinners for March: Standard portion k/g
Lamb (standard q x 500 meals) 100 75 125
Fish (standard q x 800meals) 280 240
Dinners for March: Actual portion k/g
Lamb (500 meals) 105 107 120
Fish (800meals) 300 213
Price Variance: Actual quantity (Actual Price - Standard Price)
Lamb Dinner 250 (42-40)
500 unfavourable
Fish fillets 170 (63-60)
510 unfavourable
Chips 300 (25-30)
1500 favourable
Mixed veggies 200 (27-25)
400 unfavourable
Quantity Variance: Standard Price (Actual quantity - Standard Quantity)
Lamb Dinner 40 (105-100)
200 unfavourable
Fish fillets 60 (300-280)
1200 unfavourable
Chips 30 (320-315)
150 unfavourable
Mixed veggies 25 (120-125)
125 favourable
3.2. Critical discuss the variances
Price variance = total variance of all ingredients
= (500 + 510 -1500 + 400)
= -90 favourable
Quantity variance = total variance of all ingredients
= 200 + 1200 + 150 – 125
= 1425 unfavourable
Price variance show a favourable figure if looked at all the price variance combined for all the ingredients. Looking at the variances separately, chips purchasing process was particularly successful.
Quantity variance overshoot by far in the negative direction and attention should be given to the leaner meal portions, one of the factors that may influence the quantity process may be the quality of the ingredients that is bought.