Question

In: Accounting

The standard cost of product 777 includes 2.40 units of direct materials at $6.80 per unit....

The standard cost of product 777 includes 2.40 units of direct materials at $6.80 per unit. During August, the company bought 29,300 units of materials at $7.05 and used those materials to produce 12,400 units.

Compute the total, price, and quantity variances for materials.

Total materials variance	$	FavorableNeither favorable nor unfavorableUnfavorable
Materials price variance	$	Neither favorable nor unfavorableFavorableUnfavorable
Materials quantity variance	$	UnfavorableFavorableNeither favorable nor unfavorable

Expert Solution

Total materials variance	$ 4,197	Unfavorable
Materials price variance	$ 7,325	Unfavorable
Materials quantity variance	$ 3,128	Favorable

Calculation of Total material variance:

Total Material variance = Standard material cost - Actual material cost

= ( SQ * SP ) - ( AQ * AP )

= ( 29,760 * $ 6.80 ) - ( 29,300 * $ 7.05 )

= $ 202,368 - $ 206,565

= $ 4,197 Unfavorable

Thus, Total material variance is $ 4,197 Unfavorable

Working Note:

Calculation of Standard quantity of materials :

Standard quantity of materials ( SQ) = Actual Production units * Standard Quantity of direct material required for per unit

= 12,400 units * 2.4

= 29,760

Calculation of material price variance:

Material Price Variance= = ( SP -AP ) * AQ

= ( $ 6.80 - $ 7.05 ) * 29,300

= $ 7,325 Unfavorable

Thus, Material Price Variance is $ 7,325 Unfavorable

Calculation of Material Quantity Variance is as follows:

Material Quantity Variance = ( SQ - AQ ) * SP

= ( 29,760 - 29,300 ) * $ 6.80

= $ 3,128 Favorable

Thus, Material Quantity Variance is $ 3,128 Favorable

Note:

SQ	Standard Quantity of Material
AQ	Actual Quantity of Material
SP	Standard Price of per material
AP	Actual Price of per material

ekkarill92 answered 2 years ago

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