Question

The standard cost for Product G3 includes 2 gallons of direct materials at $4 per gallon. During the current month, 11,200 gallons of direct materials were purchased for $45,920, and 11,200 gallons were used to produce 6,000 units of Product G3.

The direct materials quantity variance for the current month is

Group of answer choices

$1,200 unfavorable

$1,120 unfavorable

$3,200 favorable

$3,280 favorable

Answer 1

Solution:

From the given choices, the correct answer is $ 3,200 favourable which is explained as follows:

Standard Raw Material Cost for 1 unit of Product G3:

Standard Raw Material Quantity	Standard Price per unit of Raw Material	Standard Raw Material Cost
2 gallons	$ 4	(2) X (4) = $ 8

Thus, Standard Raw Material Cost for 6,000 units of Product G3:

Standard Raw Material Quantity	Standard Price per unit of Raw Material	Standard Raw Material Cost
2 gallons X 6,000 units = 12,000 gallons	$ 4	(12,000) X (4) = $ 48,000

Calculation of Actual Raw Material Cost for 6,000 units of Product G3:

Actual Raw Material Quantity	Actual Price per unit of Raw Material	Actual Raw Material Cost
11,200 gallons (given)	$ 45,920 / 11,200 gallons = $ 4.1	$ 45,920 (given)

The Direct Materials Quantity Variance is

= (Standard Quantity of Raw Material for 6,000 units of Product G3- Actual Quantity of Raw Material used for 6,000 units of Product G3) X Standard Price per unit of Direct Material

=(12,000 gallons - 11,200 gallons) X ($ 4)

= 800 X 4

=$ 3,200 favourable since Actual Raw Material consumed is less than the Standard Raw Material Quantity allowed.

The answer choice of $ 1,200 unfavourable is incorrectly calculated as follows:

= (Standard Price - Actual Price) X (Standard Quantity)

=($ 4 - $ 4.1) X (12,000)

=(-0.1) X (12,000)

= $ 1,200 unfavourable

The answer choice of $ 1,120 unfavourable is incorrect because it is Direct Materials Price Variance which is calculated as follows:

=(Standard Price - Actual Price) X (Actual Quantity)

=($ 4 - $ 4.1) X (11,200)

=(-0.1) X (11,200)

=$ 1,120 unfavourable

The last answer choice of $ 3,280 favourable is incorrect because it is calculated by applying wrong formula as follows:

=(Standard Quantity - Actual Quantity) X (Actual Price per unit)

=(12,000 - 11,200) X 4.1

= 800 X 4.1

= 3,280 favourable.