Question

Company Inc. has the following direct materials standard to manufacture one unit:

1.5 pounds per unit at $4.00 per pound

Last week, 1,700 pounds of materials were purchased and used to make 1,000 units. The materials cost a total of $6,630.

Determine the Price and Quantity Variances. Show work

Answer 1

Details Given in Question Standard Quantity of material = 1.5 pound / unit Output Standard Cost of Material = $ 4.00 / pound Mterial Actual Quantity Purchased = 1700 Pound Actual Cost / Price (Total)    = $ 6630.00 Actual Unit of Out put = 1000 Unis

1) Quantity Variance = ( Standard quantity (SQ) - Actal Quantity (AQ) ) x standars Price

= ( 1.5- 1.7 ) x 4

= -0.2 x 4

= - 0.8 (Adverse) for 1 unit

2) Price Variance = ( Standard Price (SP) - Actual Price (AP) ) x Actual Quantity (AQ)

= ( 4.00 - 3.90 ) x 1.7

= 0.17 (Favorable) for 1 unit

To find out Price and Quantity Variances, the Total actual Quantity & Cost given in question should be converted into unit Quantity & cost

Actual Quantity used to Produce 1 unit (AQ) = Total Actual quantity Purchased / Total actual unit output

= 1700 / 1000

= 1.7

Actual Cost/Price of 1unit of material purchased (AP) = Total actul Cost / Total Actual Quantity Purchased

= 6630/1700

= 3.90