Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Aquatic Corp.'s standard material required to produce one Model 2000 is 15 pounds of material at $110 per pound.
Last month, Aquatic purchased 170,000 pounds of material at a total cost of $17,850,000. It used 162,000 pounds to produce 10,000 units of Model 2000.
First, we need to calculate the direct material price variance:
Direct material price variance= (standard price - actual price)*actual quantity
Actual price= 17,850,000/170,000= $105 per pound
Direct material price variance= (110 - 105)*170,000= $850,000 favorable
<u>It is favorable because the actual price per pound was lower than expected.</u>
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<u>Finally, we need to calculate the direct material quantity variance using the following formula:</u>
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 15*10,000= 150,000 pounds
Direct material quantity variance= (150,000 - 162,000)*110= $1,320,000 unfavorable
<u>It is unfavorable because it used more pounds per unit than estimated.</u>
