Question

The following materials standards have been established for a particular product: Standard quantity per unit of output 5.5 meters Standard price $ 19.10 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 9,100 meters Actual cost of materials purchased $ 182,700 Actual materials used in production 8,600 meters Actual output 1,540 units a.) What is the materials price variance for the month? b.) What is the materials quantity variance for the month?

Answer 1

Answer:

a.) Material price variance =  8,827 favorable

b.) Material Quantity variance = 12,033 favorable

Explanation :

a.) Since in the question the actual price is not given. So we have to first compute the actual price which is shown below.

= Actual cost of material purchased ÷ Actual material purchased

= $182,700 ÷ 9,100 meters

= $20.07

The equation for computing material price variance is shown below:

= Actual Quantity × ( Actual Price - Standard Price )

= 9,100 × ($20.07 - $19.10)

= 8,827 favorable.

b.) Since the standard quantity is not given in the question.

So, Standard quantity = Actual output × Standard quantity per unit of output

                                   = 1,540 × 5.5

                                   = 8,470

Calculation of materials quantity variance for the month is displayed below:

= Standard Price × (Actual Quantity - Standard Quantity)

= $19.10 × (9,100 - 8,470)

= 12,033 favorable

Here, favorable means that actual cost is higher than standard cost.

Thus, material price variance and materials quantity variance is 8,827 favorable and 12,033 favorable.