Question

Refer to the data in Exercise 9 - 7 . Assume that instead of producing 4,000 units during the month, the company produced only 3,000 units, using 14,750 pounds of material. (The rest of the material purchased remained in raw materials inventory.)
Compute the direct materials price and quantity variances for the month.

Answer 1

The company produced only 3,000 units, using 14,750 pounds of material. The rest of the material purchased remained in raw materials inventory.

Standard  Qty Allowed per unit of output: 4.6 pounds        

Standard Qty allowed for actual output (3000 units*4.6): 13800 pounds    

Standard price per pound: $ 2.50            

Actual Qty purchased: 20,000 pounds          

Actual Qty consumed: 14750 pounds          

Actual price per pound: $2.35 per pound          

               

Material Price variance: Actual Qty purchased (Standard Price-Actual price)    

   20,000 pounds (2.50-2.35)= $3000 Fav      

               

Material Quantity variance= Standard price per pound (Standard qty allowed-Actual Qty consumed)

   $ 2.50 (13800 pounds - 14750 pounds = $ 2375 unfav  

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