Solution:
Given information,
SP=$6.9
SQ=27400 (13,[email protected])
AP=$6.85
AQ=27,500
Now,
Price variance is AQ(SP-AP), or 27,500($.2)=$5500 (This is favorable, since the materials were obtained at below average cost.)
Quantity variance is SP(SQ-AQ), or $6.9(-1000)= -$6900 (This is unfavorable, since more than the standard quantity was used.)
Total materials variance can be obtained two ways:
SQ*SP-AQ*AP, or totalling the two variances already calculated.
SQ*SP-AQ*AP = 189060 - 188375
SQ*SP-AQ*AP = 685
2. Given information,
SP=$6.9
SQ=27400 (13,[email protected])
AP=$6.85
AQ=27,500
Now, price variance: AQ(SP-AP)= 27,500(6.9-6.85) =1375
Quantity variance: SP(SQ-AQ)=6.9(27,400-27,500)= -690
Thus total variance: -690
(Note that negative numbers are unfavourable, positive numbers are favourable.)
