Calculate the total raw material variance for may

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Question - CONGAVIB manufactures and sells a product from a single raw material. In its production budget, the company had planned to manufacture 1,200 units of this product for the month of May. According to the consumption of the previous months by using its usual supplier, it had planned that the manufacture of each unit would consume 5kg of raw material bought at 7.30€ per kg, that is to say a cost of raw material of 36.50€ per unit produced. 

In reality, the company produced 1,100 units in May. It used a new supplier and incurred a raw material cost of €40,600 for 5,800 kg consumed.

Calculate the total raw material variance for May and break it down into sub-variances. How do you interpret the results of your calculations and would you advise keeping the new supplier?

Reference no: EM132943633

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