Question

In: Accounting

The general model for calculating a quantity variance is: Multiple Choice Actual price × (Actual quantity...

The general model for calculating a quantity variance is:

Multiple Choice

  • Actual price × (Actual quantity of inputs used − Standard quantity allowed for output).

  • Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).

  • (Actual quantity of inputs used × Actual price) − (Standard quantity allowed for output × Standard price).

  • Actual quantity of inputs used × (Actual price − Standard price).

The following standards have been established for a raw material used to make product O84:

Standard quantity of the material per unit of output 8.8 meters
Standard price of the material $ 19.00 per meter

The following data pertain to a recent month's operations:

Actual material purchased 5,200 meters
Actual cost of material purchased $ 101,490
Actual material used in production 5,000 meters
Actual output 670 units of product O84

The direct materials purchases variance is computed when the materials are purchased.

Required:

a. What is the materials price variance for the month?

b. What is the materials quantity variance for the month?

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Handerson Corporation makes a product with the following standard costs:

Standard Quantity or Hours Standard Price or Rate
Direct materials 9.0 kilos $ 6.50 per kilo
Direct labor 0.5 hours $ 25.00 per hour
Variable overhead 0.5 hours $ 6.50 per hour

The company reported the following results concerning this product in August.

Actual output 3,700 units
Raw materials used in production 29,530 kilos
Purchases of raw materials 32,100 kilos
Actual direct labor-hours 1,110 hours
Actual cost of raw materials purchases $ 200,920
Actual direct labor cost $ 23,236
Actual variable overhead cost $ 8,040

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for August is:

Multiple Choice

  • $825 U

  • $825 F

  • $1,375 F

  • $1,375 U

Solutions

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