Question

Gumchara Corporation reported the following information with respect to the materials required to manufacture amalgam florostats during the current month. Standard price per gram of materials $ 4 Standard quantity of materials per amalgam florostat 5 grams Actual materials purchased and used in production 6,000 grams Actual amalgam florostats produced during the month 1,000 units Actual cost of materials purchased $ 18,000 Normal monthly output 900 units a. Determine Gumchara's materials price variance. b. Determine Gumchara's materials quantity variance. c. Will Gumchara's overhead volume variance be favorable or unfavorable

Answer 1

Answer and Explanation:

The computation is shown below:

a. Material Price Variance is

= Actual Quantity × (Actual Rate - Standard Rate)

= 6000 × ($18000 ÷ 6000 - $4)

= $6,000 Favorable

b. Material Quantity Variance is

= Standard Rate × (Actual Quantity - Standard Quantity)

= $4 × (6000 - 5 × 1000)

= $4,000 (Unfavorable)

c. It is favorable as actual production is more than the normal monthly output