Accounting for Managers: Interpreting accounting information for decision-making

234 ACCOUNTING FOR MANAGERS

Table 15.9 Materials price variance

Plastic

Actual quantity 19,000

Standard price @ £1.50 28,500

Actual quantity 19,000

Actual price @ £1.40 26,600

Favourable variance 1,900

Metal

Actual quantity 10,000

Standard price @ £2.00 20,000

Actual quantity 10,000

Actual price @ £2.10 21,000

Adverse variance −1,000

Wood

Actual quantity 38,000

Standard price @ £0.75 28,500

Actual quantity 38,000

Actual price @ £0.70 26,600

Favourable variance 1,900

Total price variance – favourable 2,800

Table 15.10 Total materials variance

Usage – adverse −5,000

Price – favourable 2,800

Total – adverse −2,200

Plastic 400

Metal −3,000

Wood 400

−2,200

žpoor-quality material that required greater skill to work;
žthe lack of unskilled labour that was replaced by skilled labour;
žpoor production planning.

Labour rate variance

The labour rate variance is shown in Table 15.13. Skilled labour costs an additional
25p for each hour worked, while unskilled labour was paid the standard rate. This
may be the result of: