Answer:
(a) $9,000 U
(b) $5,625 F
(c) $3,375 U
Explanation:
Given that,
Production of a Product requires = 2.5 standard pounds per unit
Standard price = $3.75 per pound
Number of units = 15,000
Pounds of material purchased = 36,000
Purchasing price = $4.00 per pound
(a) Direct material price variance:
= [(Actual cost - Standard cost) × Actual quantity purchased]
= [($4 - $3.75) × 36,000]
= $9,000 unfavorable variance
(b) Quantity variance:
= [(Actual quantity used - Standard quantity used) × Standard cost per unit]
= [(36,000 - 37,500) × 3.75]
= 5,625 favorable variance
Workings:
Standard quantity used:
= No. of units × Standard price
= 15,000 × 2.5 standard pounds per unit
= 37,500
(c) Cost variance:
= Direct material quantity variance + Direct material price variance
= 5,625 favorable variance + (- $9,000 unfavorable variance)
= $3,375 unfavorable variance