Question

In: Accounting

Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or...

Corporation makes a product with the following standard costs:

Standard Quantity or Hours Standard Price or Rate
Direct materials 2.0 grams $ 7.00 per gram
Direct labor 0.8 hours $ 16.00 per hour
Variable overhead 0.8 hours $ 4.00 per hour

The company produced 4,500 units in January using 10,260 grams of direct material and 2,240 direct labor-hours. During the month, the company purchased 10,830 grams of the direct material at $7.20 per gram. The actual direct labor rate was $16.95 per hour and the actual variable overhead rate was $3.90 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials quantity variance for January is:

Solutions

Expert Solution

Answer-----------

Material quantity variance $             8,820.00 Unfavourable-U

Alternate answer using quantity purchased

Material quantity variance $           12,810.00 Unfavourable-U

Working

Material Quantity Variance
( Standard Quantity - Actual Quantity ) x Standard Rate
( 9000 - 10260 ) x $              7.00
-8820
Variance $                8,820.00 Unfavourable-U

.

Standard DATA for 4500 units
Quantity (SQ)
[A]
Direct Material ( 2 grams x 4500 Units)=9000 grams

Working for alternate answer

Material Quantity Variance
( Standard Quantity - Actual Quantity ) x Standard Rate
( 9000 - 10830 ) x $              7.00
-12810
Variance $             12,810.00 Unfavourable-U

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