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Calculate the total raw material variance for May

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Question - NOVOMAT 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 in May. Based on consumption in previous months using its usual supplier, it had planned that the manufacture of each unit would consume 5kg of raw material purchased at €7.30 per kg, giving a raw material cost 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: EM132963375

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