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Post Info TOPIC: management accounting -variances on material usage

Senior Member

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Posts: 323
management accounting -variances on material usage

Hi guys . I would like to ask you for help.
On standard cost card per unit materials are calculated as 3 kg x 2 pounds per kilogram which equals 6 pounds. Actual usage of material is 100 kilograms. Standard usage is 120 kilograms.I saved 20 kilograms. When I want to calculate my saving in terms of money I multiply 20 kilograms times 2 pounds (standard cost) which equals to 40 pounds. I have troubles to grasp why when I want to calculate my actual savings I have to use standard cost which is 2 pounds. Standard cost is not actual cost so why I have to use standard cost when I calculate my actual saving on materials ? Please, help



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Posts: 909

Hi Rafal

Standard costing is used as a form of planning for businesses and the expected costs which will then enable them to work out the variances between the expected costs and the actual costs, the standard cost card is used with the information that the business has to enable it to come up with a total cost per unit, it can then use this figure against the actual cost figure to work out any variances and then investigate the reasons behind the variances.



These are only my opinions of how I see things and therefore should not be taken as advice

Master Book-keeper

Status: Offline
Posts: 8003

A thank you to Doug wouldnt go amiss.

I would suggest, after a long break, the best place to start is to go back to level 2 costings, work through the book again and it will help with your level 3 and beyond.



Fallows Hall Ltd

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

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