Question

Manipulation​ Manufacturing's (AMM) standards anticipate that there will be 5 pounds of raw material used for every unit of finished goods produced. AMM began the month of MayMay with 8,000 pounds of raw​ material, purchased 25,500 pounds for $ 15,300 and ended the month with 7,400 pounds on hand. The company produced 4,9004,900 units of finished goods. The company estimates standard costs at $ 1.10 per pound. The materials price and efficiency variances for the month of MayMay ​were:

Answer 1

Answer:

price variance: 13,050 favorable

quantity variance: -1,760 unfavorable

Explanation:

standard quantity 5

standard price 1.1 per pound

actual quantity for 4900 units

$beginning \: inventory + purchases = ending \: inventory + used$

8000 + 25,500 -7,400 = 26,100 pounds

standard quantity 4,900*5= 24,500

actual price 15,300/25,500 = 0.60

standard price = 1.10

$price \: var = actual \: pounds(STD \: price - actual \: price)$

$26100(1.1 - 0.6) = 13050 \: favorable$

Because actual is lower than STD the company saved money spending. It is favorable.

$quantity \: var = STD \: price(STD \: quantity - actual \: quantity)$

$1.10(24500 - 26100) = - 1760 \: unfavored$

Because the company used more pounds than STD the quantity variance is unfavorable