Question

In: Accounting

the standard to make one pocketbook is that each unit produced requires 1.75 feet of leather...

the standard to make one pocketbook is that each unit produced requires 1.75 feet of leather at a cost of $ 16 per foot. During the month, 34,000 pocketbooks were produced and 61,600 feet of leather was used. The amount of leather purchased for the month was 71,000 feet at a cost of $1,118,250.

Materials price Variance 15,400 F

Materials Efficiency (Quantity) Variance 33,600U

Materials Total Variance 18,200U

Materials Purchase Price Variance 17,750 F

Question: Come up with a story to explain the materials variances. make sure your explanation fully explains All of the variances.

Solutions

Expert Solution

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

                                       = {($16 per foot - ($1118250/71000 feet)}*61600 feet   

                                      = ($16 per foot - $15.75 per foot)*61600 feet

                                      = $15400 Favourable

Material Quantity variance = (Standard Quantity- Actual Quantity)*$16 per foot

                                              =(59500 feet – 61600 feet)*$16 per foot

                                             = $33600 Unfavourable

Material total variance = Material price variance + Material quantity variance

                                     =$15400 F+ $33600 U

                                     =$18200 Unfavourable

Material Purchase price variance = (Standard price-Actual purchase price )*Actual units purchased

                                      = {($16 per foot - ($1118250/71000 feet)}*71000 feet   

                                      = ($16 per foot - $15.75 per foot)* 71000 feet

                                      = $17750 Favourable

Where:-

Standard Quantity = No. of feet per unit*Actual output

                               =1.75 feet per unit *34000 units =59500 feet

ekkarill92 answered 2 years ago
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