Answer:
There are various material variances, but main are Material Price Variance and Direct Material Quantity Variance and with the combination of these 2 variances we have Material Usage Variance
Material Price Variance = (Standard Price - Actual Price) X Actual Quantity
Given standard Price = $5 per unit
Actual Price = $5 - 4% = $4.8
Material Price Variance = ($5 - $4.8) X 16,500 = $3,300 Favorable
Material Quantity Variance = (Standard Quantity - Actual Quantity) X Standard Price
Standard Quantity = 4,000 units X 4 pounds per unit = 16,000 pounds
Material Quantity Variance = (16,000 - 16,500) X $5 = - $2,500 Unfavorable
Material Usage Variance = Standard Price X Standard Quantity - Actual Price X Actual Quantity
= ($5 X 16,000) - ($4.8 X 16,500)
= $80,000 - $79,200 = $800 Favorable = Material Price Variance + Material Quantity Variance = $3,300 + (-$2,500) = $800 Favorable
Material Price Variance = $3,300 Favorable
Material Quantity Variance = - $2,500 Unfavorable
Material Usage Variance = $800 Favorable
