Question

Products manufactures faux boulders to be used in various landscaping applications. A special resin is used to make the boulders. The standard quantity of resin used for each boulder is 2 pounds. Mitchell Products uses a standard cost of $ 1.80 per pound for the resin. The company produced 11 comma 000 boulders in June. In that​ month, 21 comma 750 pounds of resin were purchased at a total cost of $ 43 comma 500. A total of 21 comma 500 pounds were used in producing the boulders in June.
Requirements
a. Calculate the direct material price variance.
b. Calculate the direct material quantity variance.

Answer 1

Answer:

a. $4,300 Adverse

b. $900 favorable

Explanation:

a. Calculate the direct material price variance.

Actual cost of resin per pound = $43,500 / 21,750 = $2 per pound

Direct material price variance = (21,500 * $2) - (21,500 * $1.80) = $43,000 - $38,700 = $4,300 Adverse

b. Calculate the direct material quantity variance.

Total standard quantity = 2 * 11,000 = 22,000 pounds

Direct material quantity variance = $1.80 * (22,000 - 21,500) = $900 favorable