Materials and labour are the two direct costs of a product, and they are where most variance questions begin. The reasoning is simple. Each has a price (what you pay per kilogram or per hour) and a quantity (how much you use). A variance in the total cost can come from paying a different price, from using a different quantity, or from both.
Splitting the total into these parts is what turns a bare number into something a manager can act on.
This topic covers the direct materials variances (total, price, usage, and the mix and yield split of usage), the direct labour variances (total, rate, efficiency and idle time, with idle time built into the standard in two ways), the line-by-line method that many students find quicker, and the likely causes, interrelationships and remedies. Variable overhead, fixed overhead and sales variances follow in later topics.
Every calculation is checked back to the total, because the parts must add up.
In 30 seconds
Compare actual with the standard cost of actual output. Materials price variance = (standard price − actual price) × actual quantity purchased. Materials usage variance = (standard quantity for actual output − actual quantity used) × standard price. Labour rate variance = (standard rate − actual rate) × hours paid. Labour efficiency variance = (standard hours for actual output − hours worked) × standard rate.
Idle time variance = (hours paid − hours worked) × standard rate, always adverse unless idle time is built into the standard. If two or more materials are mixed, usage splits into mix and yield. Favourable (F) means actual cost is below standard, adverse (A) above.
The standard and actual data used for materials
Product Z is made from two materials, P and Q. The standard cost per unit is:
| Material | Standard quantity | Standard price | Standard cost per unit |
|---|---|---|---|
| P | 5 kg | ₦400 per kg | ₦2,000 |
| Q | 3 kg | ₦600 per kg | ₦1,800 |
| Total | 8 kg | ₦475 per kg (average) | ₦3,800 |
In the period, 1,200 units were made. Material P: 5,950 kg bought and used, costing ₦2,320,500 (₦390 per kg). Material Q: 3,750 kg bought and used, costing ₦2,325,000 (₦620 per kg).
Direct materials total cost variance
The total variance is the difference between the actual cost of materials for the actual output and the standard cost of the materials for that output.
| ₦ | Material P | Material Q | Total |
|---|---|---|---|
| Standard cost of actual output (1,200 units × standard quantity × standard price) | 2,400,000 | 2,160,000 | 4,560,000 |
| Actual cost | (2,320,500) | (2,325,000) | (4,645,500) |
| Variance | 79,500 F | 165,000 A | 85,500 A |
The total is adverse. To learn why, split it into a price part and a usage part.
Direct materials price variance
The materials price variance measures the difference between the actual price paid for the materials and the price that should have been paid (the standard price). It can be calculated on materials purchased or materials used. It is usually calculated at the point of purchase, so that stock is carried at standard cost.
Price variance = (standard price × actual quantity purchased) − actual cost of the purchases.
| ₦ | Material P | Material Q | Total |
|---|---|---|---|
| Standard cost of actual purchases (AQ × SP) | 2,380,000 (5,950 × 400) | 2,250,000 (3,750 × 600) | 4,630,000 |
| Actual cost | (2,320,500) | (2,325,000) | (4,645,500) |
| Price variance | 59,500 F | 75,000 A | 15,500 A |
P was bought for less than standard (₦390 against ₦400), saving ₦10 on each of 5,950 kg. Q cost ₦20 more than standard (₦620 against ₦600) on 3,750 kg.
Direct materials usage variance
The materials usage variance compares the quantity actually used to make the actual output with the quantity that should have been used, the standard quantity for that output. The difference in kilograms is converted to naira at the standard price.
Usage variance = (standard quantity for actual output − actual quantity used) × standard price.
| Material P | Material Q | |
|---|---|---|
| Standard: 1,200 units should use | 6,000 kg (1,200 × 5) | 3,600 kg (1,200 × 3) |
| Actual: 1,200 units did use | (5,950 kg) | (3,750 kg) |
| Usage variance (kg) | 50 F | 150 A |
| Standard price per kg | ₦400 | ₦600 |
| Usage variance (₦) | 20,000 F | 90,000 A |
Total usage variance = ₦20,000 F + ₦90,000 A = ₦70,000 A.
Check. Price ₦15,500 A + usage ₦70,000 A = ₦85,500 A, which equals the total variance. ✓
The line-by-line method
Many students prefer to set the figures in a column and subtract. Start with the actual cost and change one element at a time:
| Line | Material P (₦) | Variance | Material Q (₦) | Variance |
|---|---|---|---|---|
| AQ purchased × actual cost | 2,320,500 | 2,325,000 | ||
| AQ purchased × SC (standard cost) | 2,380,000 | 59,500 F price | 2,250,000 | 75,000 A price |
| AQ used × SC | 2,380,000 | nil (stock movement) | 2,250,000 | nil |
| SQ for actual output × SC | 2,400,000 | 20,000 F usage | 2,160,000 | 90,000 A usage |
If the quantity purchased differs from the quantity used, an extra line appears. The difference between AQ purchased and AQ used, at standard cost, is the stock movement, which is not a variance because stock is held at standard cost.
Materials mix and yield variances
When two or more materials are blended in a process, the usage variance can be split into two parts. The mix variance shows the effect of using a different proportion of each material from the standard mix. The yield variance shows the effect of the total input producing more or less output than the standard. The two always sum to the usage variance.
The analysis is worthwhile only if management can control the proportions used.
Mix variance
- Take the total actual quantity of all materials used (5,950 + 3,750 = 9,700 kg).
- Share it in the standard proportions (5:3) to find what each material would have been in the standard mix.
- Compare with the actual quantity of each. The mix variance in kg is the difference. The total in kg is always zero.
- Multiply each by its standard price and add.
| Material | Actual input in standard mix (kg) | Actual input used (kg) | Mix variance (kg) | Standard price | Mix variance (₦) |
|---|---|---|---|---|---|
| P (5/8 × 9,700) | 6,062.5 | 5,950 | 112.5 F | 400 | 45,000 F |
| Q (3/8 × 9,700) | 3,637.5 | 3,750 | 112.5 A | 600 | 67,500 A |
| Total | 9,700 | 9,700 | 0 | 22,500 A |
The mix is adverse because more of the expensive material Q and less of the cheaper P was used than the standard mix requires.
Yield variance
Input of 9,700 kg should have produced 9,700 ÷ 8 = 1,212.5 units, but only 1,200 were produced.
- Input method.
Standard input for 1,200 units = 1,200 × 8 = 9,600 kg.
Actual input = 9,700 kg.
Excess = 100 kg × standard cost per kg of input (₦3,800 ÷ 8 = ₦475) = ₦47,500 A. - Output method.
12.5 units short × standard cost per unit of output (₦3,800) = ₦47,500 A.
| ₦ | |
|---|---|
| Mix variance | 22,500 A |
| Yield variance | 47,500 A |
| Usage variance | 70,000 A |
(In examples with awkward numbers the two methods of the yield variance can differ slightly because of rounding. Use one method consistently.)
Line-by-line for mix and yield
| Working | ₦ | Variance | |
|---|---|---|---|
| Actual quantity in actual mix at standard cost | 5,950 × 400 + 3,750 × 600 | 4,630,000 | |
| Actual quantity in standard mix at standard cost | 6,062.5 × 400 + 3,637.5 × 600 (or 9,700 × ₦475) | 4,607,500 | 22,500 A mix |
| Standard quantity for actual output at standard cost | 6,000 × 400 + 3,600 × 600 (or 9,600 × ₦475) | 4,560,000 | 47,500 A yield |
Factors to consider when changing the mix
- Cost. The cheapest mix may not be the most cost-effective. A favourable mix variance is often offset by an adverse yield variance, so the total cost per unit can increase.
- Quality. A cheaper mix may make a poorer product that customers will not pay the same price for, and more returns and lost repeat business can follow.
Causes of materials variances
| Variance | Possible causes |
|---|---|
| Price, favourable | A different, cheaper supplier. Bulk purchase discounts. Materials of lower quality than standard |
| Price, adverse | A more expensive supplier. Supplier price increases above expectations (such as inflation or a currency fall). A severe shortage pushing up market prices. Better quality than standard |
| Usage, favourable | Lower wastage than expected. Improved production methods |
| Usage, adverse | Higher wastage. Poor handling and breakages. Materials of cheaper quality than standard, with more thrown away |
Interrelationship between price and usage
The causes can be linked. If a firm buys a better and dearer material, the price variance is adverse, but better material may reduce wastage, giving a favourable usage variance. If it buys cheap material, the price variance is favourable but usage may be adverse. Management should look at both together. Judging a buyer on price alone can encourage purchases that cost more overall.
The data used for labour
Product Z also needs skilled labour. The standard is 2 hours per unit at ₦1,500 per hour, a standard labour cost of ₦3,000 per unit. In the period, 1,200 units were produced. Hours paid for were 2,520, hours actually worked were 2,450, and the cost of the hours paid for was ₦3,906,000 (₦1,550 per hour).
Direct labour total cost variance
| ₦ | |
|---|---|
| Standard: 1,200 units should cost (1,200 × ₦3,000) | 3,600,000 |
| Actual: 1,200 units did cost | (3,906,000) |
| Total labour cost variance | 306,000 A |
Labour rate variance
The labour rate variance compares the actual cost of the hours paid for with the standard cost of those hours. It is the labour equivalent of the materials price variance.
Rate variance = (standard rate × hours paid for) − actual cost of hours paid for.
Hours paid for: 2,520 × ₦1,500 = ₦3,780,000. Actual cost ₦3,906,000. Rate variance = ₦126,000 A. If there are several labour grades with different standard rates, calculate it separately for each.
Labour efficiency variance
The labour efficiency variance (also called the productivity variance) compares the hours actually worked with the standard hours for the actual output, valued at the standard rate.
Efficiency variance = (standard hours for actual output − actual hours worked) × standard rate.
1,200 units should take 2,400 hours. Hours worked = 2,450. Efficiency variance = (2,400 − 2,450) × ₦1,500 = 50 hours A × ₦1,500 = ₦75,000 A.
Idle time variance
Idle time occurs when employees are paid but have no work to do. Possible causes are a machine breakdown, waiting at a bottleneck earlier in the process, running out of a material while waiting for delivery, and lack of customer orders. Idle time is recorded, and the lost hours are measured. The idle time variance is part of the efficiency variance.
Idle time not part of the standard
If no allowance for idle time is in the standard, any idle time is unexpected and the variance is always adverse.
Idle time variance = (hours paid for − hours worked) × standard rate.
Idle time = 2,520 − 2,450 = 70 hours × ₦1,500 = ₦105,000 A. If idle time is not recorded separately, it is simply included in the efficiency variance.
| ₦ | Working | Variance |
|---|---|---|
| Hours paid for at actual rate | 2,520 hours at actual cost | 3,906,000 |
| Hours paid for at standard rate | 2,520 × 1,500 | 3,780,000: 126,000 A rate |
| Hours worked at standard rate | 2,450 × 1,500 | 3,675,000: 105,000 A idle time |
| Standard hours for output at standard rate | 2,400 × 1,500 | 3,600,000: 75,000 A efficiency |
Check: ₦126,000 + ₦105,000 + ₦75,000 = ₦306,000 A, the total. ✓
Idle time included in the standard
Sometimes some idle time is normal in a process, for example because of regular bottlenecks. It can be built into the standard in two ways. Suppose a unit needs 1.8 hours of productive work, and idle time is expected to be 10% of the time paid for, so 2.0 hours are paid for per unit (1.8 ÷ 90%). Expected idle time is 0.2 hours per unit. The standard cost per unit is still 2.0 × ₦1,500 = ₦3,000.
| Method 1: idle time as a separate element | Method 2: idle time inside the standard hours | |
|---|---|---|
| Expected idle hours | 1,200 × 0.2 = 240 | 10% of hours paid for (2,520) = 252 |
| Actual idle hours | 70 | 70 |
| Idle time variance | (240 − 70) = 170 hours F × ₦1,500 = ₦255,000 F | (252 − 70) = 182 hours F × ₦1,500 = ₦273,000 F |
| Standard hours worked for the output | 1,200 × 1.8 = 2,160 | 2,400 − 252 = 2,148 |
| Efficiency variance | (2,160 − 2,450) = 290 hours A × ₦1,500 = ₦435,000 A | (2,148 − 2,450) = 302 hours A × ₦1,500 = ₦453,000 A |
| Net (idle time + efficiency) | ₦180,000 A | ₦180,000 A |
The split differs, but the net is the same. The grand total still agrees: rate ₦126,000 A + net ₦180,000 A = ₦306,000 A. A favourable idle time variance simply means that there was less idle time than the standard allowed. In summary, the idle time variance is part of the efficiency variance. Different methods give a different split but the sum is always the same.
Causes of labour variances
| Variance | Possible causes |
|---|---|
| Rate, favourable | Less experienced (cheaper) workers used. A pay rise smaller than expected |
| Rate, adverse | A pay increase. Overtime paid at a premium. More skilled and experienced workers, paid above standard |
| Efficiency, favourable | More efficient methods. Good morale and management. Incentive schemes. More experienced workers who work faster |
| Efficiency, adverse | Less experienced workers. Poor morale. (Idle time from breakdowns, shortages or lack of orders shows up in the idle time variance.) |
Interrelationship between rate and efficiency
If a lower grade of worker replaces the normal grade, the rate variance is favourable (they are paid less), but the efficiency variance may be adverse (they take longer). Inexperienced workers may also waste more material, causing an adverse materials usage variance. So three variances may share one cause, and they should be read together.
Background: labour mix and yield
Background: the syllabus mentions the labour mix variance, but the syllabus explains the method only for materials. The idea is the same.
Product Z could use two grades. Standard per unit: skilled 2 hours at ₦1,500 and unskilled 4 hours at ₦600 (a 1:2 mix, standard cost ₦5,400 per unit, ₦900 per hour). For 1,200 units, standard hours are 7,200. Actual hours: skilled 2,900, unskilled 4,900, total 7,800.
- Mix: in the standard 1:2 mix, 7,800 hours would be 2,600 skilled and 5,200 unskilled.
Skilled: (2,600 − 2,900) = 300 hours A × ₦1,500 = ₦450,000 A.
Unskilled: (5,200 − 4,900) = 300 hours F × ₦600 = ₦180,000 F.
Mix = ₦270,000 A. - Yield (efficiency of the total hours):
(7,200 − 7,800) = 600 hours A × ₦900 = ₦540,000 A. - Total efficiency.
₦810,000 A.
Check by grade: skilled (2,400 − 2,900) × ₦1,500 = ₦750,000 A; unskilled (4,800 − 4,900) × ₦600 = ₦60,000 A; total ₦810,000 A. ✓
The ideas in more depth
Why the price variance uses purchases but usage uses consumption
Material may be bought in one month and used in another. If stock is carried at standard cost, the price variance is recorded when the material is bought, because that is when the buyer’s performance can be judged. The usage variance arises when the material is used, because that is when the factory’s performance shows. The buyer and the factory manager then answer for the right variance.
Standard hours, hours worked and hours paid
Three hour figures matter. Standard hours are what the output should have taken. Hours worked is the time actually spent on production. Hours paid includes idle time. The differences: paid minus worked = idle time; worked minus standard = efficiency; and price differences arise on hours paid.
Favourable is not always good
A favourable materials price variance from cheap, poor-quality material may lead to waste, rework and returns. A favourable efficiency variance from rushing may harm quality. Always ask why.
Remedies
- Analyse the root causes using variance reports and discussion with budget holders.
- Take corrective action: renegotiate supplier contracts, improve training, repair equipment, improve scheduling.
- Refine the standards where market prices or methods have changed.
- Monitor performance continuously and look at trends.
Worked example: materials and labour together
Scenario. Aba Furniture Ltd makes tables. The standard per table is 6 m of timber at ₦3,000 per metre and 5 labour hours at ₦800 per hour. In the month, 400 tables were made. 2,700 m of timber were bought for ₦8,262,000, and 2,520 m were used. Labour hours paid were 2,050, hours worked were 1,960 and the labour cost was ₦1,681,000. Calculate the materials price and usage variances, and the labour rate, idle time and efficiency variances.
- Materials price.
(on purchases): 2,700 × ₦3,000 = ₦8,100,000 against actual ₦8,262,000 = ₦162,000 A. - Materials usage:
standard 400 × 6 = 2,400 m.
Actual 2,520 m.
Excess 120 m × ₦3,000 = ₦360,000 A.
(The 180 m bought but not used is a stock increase, valued at standard, so it is not a variance.) - Labour rate:
2,050 × ₦800 = ₦1,640,000 against actual ₦1,681,000 = ₦41,000 A. - Idle time:
(2,050 − 1,960) = 90 hours × ₦800 = ₦72,000 A. - Efficiency:
standard hours 400 × 5 = 2,000.
Hours worked 1,960.
(2,000 − 1,960) = 40 hours F × ₦800 = ₦32,000 F. - Check on labour:
standard cost ₦1,600,000 − actual ₦1,681,000 = ₦81,000 A.
And ₦41,000 A + ₦72,000 A − ₦32,000 F = ₦81,000 A. ✓ - Comment. Timber was dear and wasted more than allowed. Labour was efficient while working, but 90 hours were idle. The manager should find out why (a breakdown, or waiting for timber, perhaps linked to the usage problem).
Common mistakes in the exam
- Using the actual quantity used for the price variance when the question gives a different quantity purchased.
- Using the actual price instead of the standard price to value the usage variance.
- Using units sold or budgeted output instead of actual units produced to find the standard quantity or hours.
- Getting the sign wrong. If actual cost is above standard, the variance is adverse.
- Calculating the efficiency variance on hours paid instead of hours worked.
- Treating idle time as favourable when it is not part of the standard.
- Forgetting that the mix variance in kg must total zero.
- Not checking that price + usage (or rate + idle + efficiency) equals the total variance.
Quick revision
- Materials price = (SP − AP) × AQ purchased. Usage = (SQ − AQ used) × SP.
- Mix: actual total input in standard mix against actual mix, × SP. Yield: (standard input − actual input) × standard cost per kg of input. Mix + yield = usage.
- Labour rate = (SR − AR) × hours paid. Idle time = (hours paid − worked) × SR. Efficiency = (SH − hours worked) × SR.
- Idle time not in standard: always adverse. In standard: compare expected with actual idle.
- Price + usage = total materials variance. Rate + idle + efficiency = total labour variance.
Practice questions
These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer.
Section A style: multiple choice
Question 1. 1,000 kg of material were bought for ₦52,000. The standard price is ₦50 per kg. The materials price variance is:
- ₦2,000 favourable
- ₦2,000 adverse
- ₦50,000 adverse
- Nil
Show the answer
B. Standard cost ₦50,000 less actual ₦52,000 = ₦2,000 adverse.
Question 2. The standard usage for actual output is 900 kg. Actual usage is 950 kg. The standard price is ₦50 per kg. The usage variance is:
- ₦2,500 adverse
- ₦2,500 favourable
- ₦45,000 adverse
- ₦47,500 adverse
Show the answer
A. 50 kg × ₦50 = ₦2,500 adverse.
Question 3. The materials price variance is usually calculated on the quantity:
- Used
- Purchased
- Sold
- Budgeted
Show the answer
B. It keeps stock at standard cost.
Question 4. 500 hours are paid for at a total cost of ₦52,000. The standard rate is ₦100 per hour. The labour rate variance is:
- ₦2,000 adverse
- ₦2,000 favourable
- ₦50,000
- Nil
Show the answer
A. Standard ₦50,000 less actual ₦52,000.
Question 5. Standard hours for the output are 480 and hours worked are 500 at a standard rate of ₦100. The efficiency variance is:
- ₦2,000 adverse
- ₦2,000 favourable
- ₦8,000 adverse
- ₦48,000
Show the answer
A. 20 hours × ₦100 = ₦2,000 adverse.
Question 6. Hours paid 520, hours worked 500, standard rate ₦100. The idle time variance (not in the standard) is:
- ₦2,000 adverse
- ₦2,000 favourable
- ₦52,000
- Nil
Show the answer
A. 20 hours × ₦100, always adverse if idle time is not in the standard.
Question 7. Mix plus yield equals:
- The price variance
- The usage variance
- The total variance
- The rate variance
Show the answer
B. They split the usage variance.
Question 8. The total mix variance in quantity (kg) is:
- Always zero
- Always positive
- Always negative
- Equal to the yield variance
Show the answer
A. The actual total is shared in the standard proportions.
Question 9. A favourable labour rate variance and an adverse efficiency variance may both result from:
- Using a lower grade of labour than standard
- Using a higher grade of labour
- Paying overtime
- A fall in demand
Show the answer
A. Cheaper workers cost less but take longer.
Question 10. An adverse materials price variance and a favourable usage variance may both result from:
- Buying better quality material that wastes less
- Buying cheaper material
- Poor handling
- A supplier discount
Show the answer
A. Dearer but better material.
Section B style: written questions
Question 11 (10 marks). Explain the materials price and usage variances and the labour rate and efficiency variances, and give two possible causes of each adverse variance.
Question 12 (20 marks). A product has the standard materials cost per unit: Material X 4 litres at ₦200 and Material Y 6 litres at ₦100. In a month 500 units were made. 2,200 litres of X cost ₦462,000 and 2,700 litres of Y cost ₦256,500, all bought and used.
(a) Calculate the total materials cost variance. (4 marks)
(b) Calculate the materials price and usage variances for each material. (8 marks)
(c) Analyse the total usage variance into mix and yield variances. (6 marks)
(d) Explain one possible cause of the mix variance. (2 marks)
A further written question
Question 13 (10 marks). The standard for a unit is 3 labour hours at ₦900 per hour. In a month 800 units were made. Hours paid were 2,500, hours worked 2,380, and the labour cost was ₦2,300,000. (a) Calculate the total labour variance, rate variance, idle time variance and efficiency variance. (8 marks) (b) State two possible causes of the adverse idle time variance. (2 marks)
Model answers
Show the model answer to Question 11
Materials price variance: the difference between the actual price paid and the standard price, multiplied by the quantity purchased. Adverse causes: a more expensive supplier or a supplier price rise above expectations; a shortage that raised market prices; buying a higher quality than standard. Materials usage variance: the difference between the quantity used and the standard quantity for the actual output, valued at the standard price.
Adverse causes: higher wastage than expected; poor handling and breakages; cheaper material that causes more waste.
Labour rate variance: the difference between the actual rate paid and the standard rate, multiplied by the hours paid. Adverse causes: a pay increase; overtime at a premium; more skilled workers than standard. Labour efficiency variance: the difference between the hours worked and the standard hours for the output, valued at the standard rate. Adverse causes: less experienced workers than standard; poor morale.
Show the model answer to Question 12
(a)
- Standard.
X 500 × 4 = 2,000 litres × ₦200 = ₦400,000. - Y 500 × 6 = 3,000 litres × ₦100 = ₦300,000.
- Total ₦700,000.
- Actual ₦462,000 + ₦256,500 = ₦718,500.
- Total variance = ₦18,500 A.
(b) Price.
- X: 2,200 × ₦200 = ₦440,000 against ₦462,000 = ₦22,000 A.
- Y: 2,700 × ₦100 = ₦270,000 against ₦256,500 = ₦13,500 F.
- Net price ₦8,500 A.
- Usage. X: (2,000 − 2,200) = 200 litres A × ₦200 = ₦40,000 A.
- Y: (3,000 − 2,700) = 300 litres F × ₦100 = ₦30,000 F.
- Net usage ₦10,000 A.
- Check.
₦8,500 A + ₦10,000 A = ₦18,500 A. ✓
(c)
- Total input = 4,900 litres.
- Standard mix 4:6.
- X in standard mix = 1,960
- Y = 2,940.
- Mix: X (1,960 − 2,200) = 240 A × ₦200 = ₦48,000 A.
- Y (2,940 − 2,700) = 240 F × ₦100 = ₦24,000 F.
- Mix = ₦24,000 A.
- Yield: standard input for 500 units = 5,000 litres; actual 4,900; 100 litres F × standard cost per litre (₦1,400 ÷ 10 = ₦140) = ₦14,000 F.
- Mix + yield.
₦24,000 A − ₦14,000 F = ₦10,000 A, equal to the usage variance. ✓
(d) More of the dearer material X and less of the cheaper Y may have been used because of a shortage of Y, a change in the formulation to improve quality, or operators’ own choices.
Show the model answer to Question 13
(a)
- Standard hours.
800 × 3 = 2,400. - Standard cost.
2,400 × ₦900 = ₦2,160,000. - Total variance = ₦2,160,000 − ₦2,300,000 = ₦140,000 A.
- Rate: 2,500 × ₦900 = ₦2,250,000 against ₦2,300,000 = ₦50,000 A.
- Idle time: (2,500 − 2,380) = 120 hours × ₦900 = ₦108,000 A.
- Efficiency: (2,400 − 2,380) = 20 hours F × ₦900 = ₦18,000 F.
- Check.
₦50,000 + ₦108,000 − ₦18,000 = ₦140,000 A. ✓
(b) A machine breakdown; waiting for materials because of a late delivery; a bottleneck earlier in the process; lack of customer orders. (Any two.)
Pathfinder on Material and labour variances
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Part (b) gives a standard cost for a household item (direct materials 15 square metres at ₦300, direct labour 5 hours at ₦400) and asks for variances for the period.
Revise first: Direct materials price variance
Standard costing for one product in a single cost centre, with materials A and B and labour, asking for variances and a profit reconciliation.
Revise first: Materials mix and yield variances
Items ask for the labour efficiency variance, the causes of an adverse efficiency variance, the material price variance and the material usage variance from a table of actual and standard figures.
Revise first: Labour efficiency variance
Asks for the labour rate variance from a standard rate of ₦12 per hour and given actual figures.
Revise first: Labour rate variance
Source: ICAN Pathfinder, Management Accounting. Diets covered: May Diet, 2026 and November Diet, 2025. May Diet, 2025 and November Diet, 2024 are not covered here.
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