Question

Krumple Inc. produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.7 ounces of aluminum per can. During the month of April, 450,000 cans were produced using 1,875,000 ounces of aluminum. The actual cost of aluminum was $0.10 per ounce and the standard price was $0.08 per ounce. There are no beginning or ending inventories of aluminum.
Required:Calculate the total variance for aluminum for the month of April. Enter amount as a positive number and select Favorable or Unfavorable.

Answer 1

Answer:

-$18,300(Unfavorable)

Explanation:

Material price per variance:

= Ounces of aluminium used in production(Standard price - Actual cost per ounce)

=  1,875,000 ($0.08 - $0.10)

= 1,875,000 × (-$0.02)

= -$37,500 (Unfavorable)

Material usage variance:

=  [(Cans produced × Standard unit quantity) -  Ounces of aluminium used in production] × Standard price

= [(4,50,000 × 4.7) -  1,875,000] × 0.08

= $19,200 (Favorable)

Therefore,

Total variance = Material price per variance + Material usage variance

                        = -$37,500 + $19,200

                        = -$18,300(Unfavorable)