Question

The following standards have been established for a raw material used to make product O84:Standard quantity of the material per unit of output 8.1 metersStandard price of the material $ 19.30 per meterThe following data pertain to a recent month's operations:Actual material purchased 4,400 metersActual cost of material purchased $ 88,880 Actual material used in production 4,100 metersActual output 600 units of product O84The direct materials purchases variance is computed when the materials are purchased.Required:a. What is the materials price variance for the month?b. What is the materials quantity variance for the month?

Answer 1

Answer:

a. The material price variance is $3,960 unfavorable

b. The material quantity variance is $14,6680 favorable

Explanation:

a. The computation of the material price variance is shown below:

= Actual Quantity × (Standard Price - Actual Price)

= 4,400 × ($19.30 - $88,880 ÷ 4,400)

= 4,400 × ($19.30 - $20.20)

= 4,400 × $0.9

= $3,960 unfavorable

b. The computation of the material quantity variance is shown below:

= Standard Price × (Standard Quantity - Actual Quantity)

=  $19.30 × (8.1 meters × 600 units - 4,100)

= $19.30 × (4,860 - 4,100)

= $19.30 × 760

= $14,6680 favorable