Question

Skip Company produces a product called Lem. The standard direct material cost to produce one unit of Lem is four quarts of raw material at $2.50 per quart. During May, 5,880 quarts of raw material were purchased at a cost of $14,112. All the purchased material was used to produce 1,400 units of Lem.

a. Compute the material price variance and material quantity variance for May.
Note: Do not use a negative sign with your answers.

Material price variance	Answer	AnswerFavorableUnfavorableNeither favorable or unfavorable
Material quantity variance	Answer	AnswerFavorableUnfavorableNeither favorable or unfavorable

b. Assume the same facts except that Skip Company purchased 8,400 quarts of material at the previously calculated cost per quart, but used only 5,880 quarts. Compute the material price variance and material quantity variance for May, assuming that Skip identifies variances at the earliest possible time.
Note: Do not use a negative sign with your answers.

Material price variance	Answer	AnswerFavorableUnfavorableNeither favorable or unfavorable
Material quantity variance	Answer	AnswerFavorableUnfavorableNeither favorable or unfavorable

c. Prepare the journal entries to record the material price and usage variances calculated in (b).
Note: List any multiple debits or any multiple credits in alphabetical order by account name.

Account	Debit	Credit
AnswerAccounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory	Answer	Answer
AnswerAccounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory	Answer	Answer
AnswerAccounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory	Answer	Answer
To record material price variance
AnswerAccounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory	Answer	Answer
AnswerAccounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory	Answer	Answer
AnswerAccounts PayableCost of Good SoldLabor Efficiency VarianceLabor Rate VarianceMaterial Price VarianceMaterial Quantity VarianceOH Spending VarianceRaw Material InventoryVOH Efficiency VarianceVolume VarianceWages PayableWork in Process Inventory	Answer	Answer
To record material quantity variance

Please answer all parts of the question.

Answer 1

a.

Material price variance = (Actual price - Standard price) * Actual quantity

Material price variance = ($14,112/5,880 - $2.50) * 5,880

Material price variance = ($2.4 - 2.50) * 5,880 = $588 Favorable

Material quantity variance = (Standard quantity - Actual quantity) * Standard price

Material quantity variance = (1,400*4 - 5,880) * $2.50

Material quantity variance = (5,600 - 5,880) * $2.50 = $700 Unfavorable

b.

Material price variance = (Actual price - Standard price) * Actual quantity purchased

Material price variance = ($2.4 - 2.50) * 8,400 = $840 Favorable

Material quantity variance = (Standard quantity - Actual quantity used) * Standard price

Material quantity variance = (1,400*4 - 5,880) * $2.50

Material quantity variance = (5,600 - 5,880) * $2.50 = $700 Unfavorable

c.

Account	Debit	Credit
Raw material inventory	$21,000
Material price variance		$840
Accounts payable (8,400*$2.4)		20,160
(To record material price variance)
Work in process payable	$14,000
Material quantity variance	700
Raw material inventory		$14,700
(To record material quantity variance)