Question

A manufactured product has the following information for June. Standard Actual Direct materials (7 lbs. @ $9 per lb.) 60,000 lbs. @ $9.20 per lb. Direct labor (3 hrs. @ $17 per hr.) 25,100 hrs. @ $17.60 per hour. Overhead (3 hrs. @ $11 per hour.) $ 286,800 Units manufactured 8,500 AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price Compute the direct materials price variance and the direct materials quantity variance. Indicate whether each variance is favorable or unfavorable.

Answer 1

Answer:

price variance       12,000 U

quantity variance  4,500 U

Explanation:

$(standard\:cost-actual\:cost) \times actual \: quantity= DM \: price \: variance$

std cost  $9.00

actual cost  $9.20

quantity 60,000

These are givens so no calculation needed.

$(9-9.20) \times 60,000= DM \: price \: variance$

difference  $(0.20)

price variance  $(12,000.00)

The difference is negative, we purchase at a higher price, so the variance is unfavorable

$(standard\:quantity-actual\:quantity) \times standard \: cost = DM \: quantity \: variance$

std quantity        59500.00 (7 lbs per unit x 8,500 untis manufactured)

actual quantity 60000.00

std cost                         $9.00

$(59,500-60,000) \times 9 = DM \: quantity \: variance$

difference                       -500.00

efficiency variance  $(4,500.00)

The difference betwene standard lbs and the actual lbs used into production is negative, we use more lbs than standard. This variance is also unfavorable.