Question

Materials Variances

Manzana Company produces apple juice sold in gallons. Recently, the company adopted the following material standard for one gallon of its apple juice:

     Direct materials 128 oz. @ $0.04 = $5.12

During the first week of operation, the company experienced the following results:

1. Gallon units produced: 21,000.
2. Ounces of materials purchased and used: 2,750,000 ounces at $0.045.
3. No beginning or ending inventories of raw materials.

Required:

Note: Enter favorable values as negative numbers. Enter unfavorable values as positive numbers.

1. Compute the materials price variance.
$ Unfavorable

2. Compute the materials usage variance.
$ Unfavorable

3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $21,000 unfavorable. The company purchased and used 2,420,000 ounces of material during this week. How many gallons of juice were produced? If required, round your answer to nearest whole value.
gallons

What was the actual price paid per ounce of materials? Round your answer to the nearest cent.
$ per ounce

Answer 1

		Standard PU:				Standard for Actual :
		Qty	Rate	PU		Qty	Rate	PU
		128	0.04	5.12		2688000	0.04	107,520
		Actuals :
		Qty	Rate	PU
		2750000	0.045	123,750
	1	Material Price Variance:
		(Standard Rate-Actual Rate)*Actual Qty
		(0.04-0.045)*2750000
		-13750
	2	Material Usage Variance:
		(Standard Qty-Actual Qty)*Standard Price
		(2688000-2750000)*0.04
		-2480
	3	Material Usage Variance	4000	U
		Material Price Variance	21000	U
		Material Variance	25000	U
		Actual material Used	2420000
		Material Usage Variance:
		(Standard Qty-Actual Qty)*Standard Price
		(Standard Qty-2420000)*0.04=4000(U)
		(Standard Qty-2420000)=-4000/0.04
		(Standard Qty-2420000)=-100000
		Standard Qty=-100000+2420000
		Standard Qty=2320000
		Satandard Qty PU=128
		Qty Produced=18125 (2320000/128)
		Material Price Variance:
		(Standard Rate-Actual Rate)*Actual Qty=-21000
		(0.04-AR)*2420000=-21000
		96800-2420000AR=-21000
		AR=117800/2420000
		AR=0.05