Question

West Texas Chemical Company manufactures a product called Kylon, which requires three raw materials. Production is in batches of 1,000 gallons of finished product. The firm uses standard costs as a control device. Its standard costs for materials for each batch of Kylon have been established as follows:

Material	Quantity			Standard Cost per Gallon					Standard Cost per Batch
Starter	700	gal.			$	1.80				$	1,260.00
Acid	230	gal.				5.00					1,150.00
Activator	70	gal.				7.00					490.00
Total standard cost	1,000	gal.								$	2,900.00

The output is packaged in 50-gallon drums. During the month of June 2019, 200 drums of Kylon were produced. There was no beginning or ending inventory of work in process. The materials actually used during June are listed below:

Material	Quantity			Cost per Gallon
Starter	7,070	gal.		$	1.60
Acid	2,350	gal.			5.50
Activator	490	gal.			9.10

Compute the total variance between the actual cost of the materials used during June and the standard cost of the materials. Also compute the total variance for each type of material. (Indicate the effect of each variance by selecting Favorable, Unfavorable, and "None" for no effect (i.e., zero variance).)

	WEST TEXAS CHEMICAL COMPANY Analysis of Materials Variances For Month of June 2019 Costs Variances Cost Elements Standard Actual Quantity Price Starter Standard Actual Quantity variance Price variance Acid Standard Actual Quantity variance Price variance Activator Standard Actual Quantity variance Price variance Totals

Analyze the variances for each type of material for the month. (Indicate the effect of each variance by selecting Favorable, Unfavorable, and "None" for no effect (i.e., zero variance).)

	Standard Actual Variance Starter Acid Activator Total

Answer 1

Variance report
	Costs			Variance
Cost element	Standard	Actual	Variance	Quantity		Price
				Favorable	Unfavorable	Favorable	Unfavorable
Starter	12,600	11,312	1,288		(126)	1,414
Acid	11,500	12,925	(1,425)		(250)		(1,175)
Activator	4,900	4,459	441	1,470			(1,029)
Total	29,000	28,696	304	1,470	(376)	1,414	(2,204)

Actual output	10000
Material Variance
Starter
	Standard	Budgeted based on actual results	Actual
Price	1.80	1.80	1.60
Quantity	0.70	7,000	7,070
Cost per unit	1.26	12,600	11,312
Starter Cost variance		1,288	Favorable
Material Price variance	= (Standard price - Actual Price) * Actual usage
	'(1.8-1.6)*7070
	1,414	Favorable
Material quanitity variance	= (Standard Quantity - Actual Quantity) * Budgered Price
	'(7000-7070)*1.8
	(126)	Unfavorable

Actual output	10000
Material Variance
Acid
	Standard	Budgeted based on actual results	Actual
Price	5.00	5.00	5.50
Quantity	0.23	2,300	2,350
Cost per unit	1.15	11,500	12,925
Acid Cost variance		(1,425)	Unfavorable
Material Price variance	= (Standard price - Actual Price) * Actual usage
	'(5-5.5)*2350
	(1,175)	Unfavorable
Material quanitity variance	= (Standard Quantity - Actual Quantity) * Budgered Price
	'(2300-2350)*5
	(250)	Unfavorable

Actual output	10000
Material Variance
Activator
	Standard	Budgeted based on actual results	Actual
Price	7.00	7.00	9.10
Quantity	0.07	700	490
Cost per unit	0.49	4,900	4,459
Activator Cost variance		441	Favorable
Material Price variance	= (Standard price - Actual Price) * Actual usage
	'(7-9.1)*490
	(1,029)	Unfavorable
Material quanitity variance	= (Standard Quantity - Actual Quantity) * Budgered Price
	'(700-490)*7
	1,470	Favorable