Question

Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,700 pounds) has the following standards:

	Standard Quantity		Standard Price
Whole tomatoes	4,500	lbs.	$ 0.53	per lb.
Vinegar	250	gal.	$ 3.20	per gal.
Corn syrup	22	gal.	$ 11.80	per gal.
Salt	100	lbs.	$ 2.90	per lb.

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-111 were as follows:

4,700 lbs. of tomatoes

240 gal. of vinegar

23 gal. of corn syrup

99 lbs. of salt

a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.

Ingredient	Standard Cost per Batch
Whole tomatoes	$
Vinegar	$
Corn syrup	$
Salt	$
Total	$
Standard unit materials cost per pound	$

b.  Determine the direct materials quantity variance for batch K-111. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Ingredient	Materials Quantity Variance	Favorable/Unfavorable
Whole tomatoes	$
Vinegar	$
Corn syrup	$
Salt	$
Total direct materials quantity variance	$

Answer 1

a)	Standard Unit Material Cost per Pound
	Ingredient	Standard Cost per Batch
	Whole Tomatoes	$ 2,385
	Vinegar	$ 800
	Corn Syrup	$ 259.60
	Salt	$ 290
	Total	$ 3,734.60
	Total Unit Material Cost per pound	$ 1.38
	Explanation :-
	Standard Cost = Standard Quantity * Standard Price
	Standard Cost of Whole Tomatoes per pound = 4,500 lbs * $ 0.53
	=	$ 2,385
	Standard Cost of Vinegar per pound = 250 gal. * $ 3.20
	=	$ 800
	Standard Cost of Corn Syrup per pound = 22 gal. * $ 11.80
	=	$ 259.60
	Standard Cost of Salt per pound = 100 lbs * $ 2.90
	=	$ 290
	Total Unit Material Cost per pound = Total Cost / Total Units
	=	$ 3734.60 / 2700 pounds
	=	$ 1.38
b)	Direct Material Variance
	Ingredient	Material Quantiy Variance	Favorable / Unfavorable
	Whole Tomatoes	$ 106	Unfavorable
	Vinegar	-$ 32	Favorable
	Corn Syrup	$ 11.80	Unfavorable
	Salt	- $ 2.90	Favorable
	Total Direct Material Quantity Variance	- $ 82.90	Unfavorable
	Explanation :-
	Direct Material Quantity Variance = ( Total Actual Quantity -Total Standard Quantity ) * Standard Price per unit
	Direct Material Quantity Variance of Whole Tomatoes = ( 4,700lbs - 4,500 lbs ) * $ 0.53
		=	$ 106 Unfavorable
	Direct Material Quantity Varianceof Vinegar = ( 240 gal - 250 gal ) * $ 3.20
		=	- $ 32 Favorble
	Direct Material Quantity Varianceof Corn Syrup = ( 23 gal - 22 gal ) * $ 11.80
		=	$ 11.80 Unfavorable
	Direct Material Quantity Variance of Salt = ( 99lbs - 100 lbs ) * $ 2.90
		=	$ 2.90 Favorable