Question

Irvine Fruit Basket Company makes baskets of assorted fruit. The standard and actual costs of oranges used in each basket of fruit follow. Standard Actual Average number of oranges per basket 10.00 10.40 Price per orange × $ 0.30 × $ 0.25 Cost of oranges per basket $ 3.00 $ 2.60 Irvine actually produced 27,000 baskets. Required Determine the materials price variance and indicate whether it is favorable (F) or unfavorable (U). Determine the materials usage variance and indicate whether it is favorable (F) or unfavorable (U).

Answer 1

Answer:

a. $14,040 Favorable

b. $3,240 Unfavorable

Explanation:

a. Material Price Variance = (Standard price - Actual price) × Actual quantity

= ($0.30 - $0.25) × (27,000 × $10.40)

= $0.05 × $280,800

= $14,040 Favorable

b. Materials usage variance =  (Standard quantity - Actual quantity) × Standard price

= (27,000 × $10 - 27,000 × $10.40) × $0.30

= ($270,000 - $280,800) × $0.30

= $10,800 × $0.30

= $3,240 Unfavorable