Question

The standards for product V28 call for 8.6 pounds of raw material that costs $19.00 per pound. Last month, 2,600 pounds of the raw material was purchased for $48,880. The actual output of the month was 270 units of product V28. A total of 2,500 pounds of the raw material were used to produce this output. The direct materials purchase variance is computed when the materials are purchased.
a. What is the material price variance for the month?

b. What is the materials quantity variance for the month?

Answer 1

Answer:

A. $520 U

B.178 F

Explanation:

A.

Materials price variance = (AQ × AP) – (AQ × SP)

= $48,880 – (2,600 × $19)

=$48,880-$49,400

= $520 U

Therefore the material price variance for the month is $520U

B.

Materials quantity variance = SP(AQ – SQ*)=

$19 ($2,500 – $2,322) = $178F

Therefore the materials quantity variance for the month $178F

SQ = Standard quantity per unit × Actual output

= 8.6 × 270 = $2,322