Question

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:

Answer 1

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