[Anonymous]

Ok… Right when I was feeling really comfortable with Variances, I came across this MCQ from Becker (B2) that just stumped the hell out of me. To top it off, the explanation on this one was the most confusing explanation I have ever came across, so this didn’t help me to understand how to get to the answer at all.

The question asks for the materials Price Variance. I did the approach of finding the variance between AQxAP & AQxSP. However, I couldn’t figure out how to find my plug numbers to figure out the variance. This MCQ is by far the most confusing and trickiest regarding variances I’ve come across.

Any help or some clear, concise explanation to help understand this one would be greatly appreciated. Here’s the MCQ:

ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for $105,000, and two units of raw material are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for material was $60,000, and there was an unfavorable quantity variance of $2,500.

The materials price variance for the units used in November was:

a. $2,500 favorable.

b. $2,500 unfavorable.

c. $11,000 unfavorable.

d. $12,500 unfavorable. <—-WTF how?!

[Ag12thman]

Which Becker are you using? 2012? 2013? I studied with 2011 until last month and thought their explanations sucked on some of their multiple choice questions. Variances were not well explained with Becker either, in my opinion.

FAR: July 2016

[Anonymous]

I'm using the 2013 self study online. Regarding the question, per the explanation, I can see where you can figure out the AP ($105,000/35,000 units) and the SP ($60,000/24,000 units). But, I'm still not understanding that the 12,000 units produced is the standard quantity to go by. I initially thought that the 12,000 units produced would tie into the AQ (actual quantity).

The Becker explanation says that the AQ is equal to 25,000 units which I have no idea how to calculate that number. The further explanation is just a damn wall of text that doesn't comprehend to anything learned in the lectures and in the book.

[Ag12thman]

Sorry I can't help you with the question, by the way. Hopefully someone else will be able to. I'm currently not studying after failing BEC in November (using 2011 Becker to prepare). I just wanted to point out that Becker's explanations are sometimes a crock. They sometimes assume all their students know something, when they should actually assume NONE of them know that something and explain it from that angle. This way everyone understands and is not left to wonder for hours and hours, wasting precious study time.

FAR: July 2016

[Anonymous]

I agree. Sometimes I understand a question and answer it correctly and then I see some outrageous explanation. Most of the time, they do make sense though. Although, I also used the Wiley 2009 textbooks before in my attempt 3 years ago and I can also say the same with their Q&A MCQ's.

Anyways, if anyone can help to further explain on this MCQ, would really appreciate it. Thanks in advance!

[mukluk34]

I was doing the question in 2012 Becker and the way they explained it and how it makes sense to me is that the question is asking for the units USED in November and not the overall materials price variance. Usually questions will ask for the overall materials price variance but this question only asks for the price variance of the materials actually used.

It says that the actual amount of raw materials used is 25,000 and is calculated in a separate question (D93-1.23). Another way to find the actual amount of raw materials used is that there were 12,000 units produced x 2 units of raw materials each = 24,000. The other 1,000 units comes from the efficiency variance provided. There is a 2,500 unfavorable efficiency variance, so if you divide 2,500/2.5= 1,000 units. The 2.5 is the standard price per unit of raw materials.

Then if you take the difference in price between the standard (2.5/unit) and the actual (105,000/35,000, or 3/unit) you get 0.5/unit. Multiply 0.5/unit*25,000 units USED and you get 12,500.

Hope this helps.

[Author]

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