Question

Wine Glass Inc. produces and sells wine glasses.

Per the Standards, for the months of May, each wine glass takes 2 pounds of material at $2.50 per pound.

For the Month of May, Wine Glass Inc. planned on producing and selling 200 wine glasses. They actually produced and sold 210 wine glasses, using 525 pounds of material costing $1,181.25 in actual total cost.

1. What is the Materials Activity Variance for the Month of May:
2. What is the Materials Spending Variance for the Month of May:
3. What is the Price Variance
4. What is the Quantity Variance:

Answer 1

>> Flexiable Standard cost = 210 * 2 * $ 2.5 = $ 1,050.

>> Planned standard cost = 200 * 2 * $ 2.5 = $ 1,000.

>> Actual Cost = $ 1,181.25

A . Material Activity Variance = Flexiable cost - Planned cost

A . Material Activity Variance = $ 1,050 - $ 1,000

A . Material Activity Variance = $ 50 Favorable.

B. Material Spending Variance = Flexiable cost - Actual Cost

B. Material Spending Variance = $ 1,050 - $ 1,181.25

B. Material Spending Variance = $ 131.25 Unfavorable

>> Standard Quantity = 210 * 2 = 420 pounds

>> Actual price = $ 1,181.25 / 525 = $ 2.25

C. Material Price variance = ( Standard price - Actual price ) * Actual Quantity

C. Material Price variance = ( $ 2.5 - $ 2.25 ) * 525

C. Material Price variance = $ 131.25 Favorable.

D . Material Quantity variance = ( Standard quantity - Actual quantity ) * Standard price

D . Material Quantity variance = ( 420 - 525 ) * $ 2.5

D . Material Quantity variance = $ 262.5 Unfavorable.