Question

Drop down box options: Favorable, Unfavorable, or Neither Favorable or Unfavorable

The standard cost of Product B manufactured by Pharrell Company includes 2.6 units of direct materials at $5.50 per unit. During June, 27,200 units of direct materials are purchased at a cost of $5.45 per unit, and 27,200 units of direct materials are used to produce 10,400 units of Product B. (a) Compute the total materials variance and the price and quantity variances. Total materials variance Materials price variance Materials quantity variance & (b) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.55 and the quantity purchased and used is 26,900 units. Total materials variance + Materials price variance + Materials quantity variancet +

Answer 1

(a) Direct Material cost variance including its price and quantity variance Actual Cost AQ X 27200 AP 5.45 SP Flexible cost X $ AQ 27200 Standard Cost SQL XL SP 27040 $ 5.50 $ 5.50 $ 148,240 $ 149,600 $ 148,720 Price Variance $ 1,360 Quantity Variance 880 Price Variance Quantity Variance Total Direct Material variance $ $ $ 1,360 880 480 Favorable Unfavorable Favorable (b) Direct Material cost variance including its price and quantity variance Actual Cost AQ X 26900 AP 5.55 SP Flexible cost X $ AQ 26900 Standard Cost SQL XL SP 27040 $ 5.50 $ 5.50 1 $ 149,295 $ 147,950 $ 148,720 Price Variance $ 1,345 Quantity Variance 770 Price Variance Quantity Variance Total Direct Material variance $ $ $ 1,345 770 575 Unfavorable Favorable Unfavorable Standard Quantity= number of units X lbs per unit Here number of units are 10400 units standard Ibs per unit is 2.60 so total standard quantity is 10400 X 2.60=27040 Price variance = actual cost - standard price at actual quantity (flexible cost) Quantity variance = standard price at actual quantity (flexible cost) - Standard price at standard quantity Price variance is favorable when actual cost incurred is less than standard cost at actual hours, and unfavorable when actual cost incurred is more than standard cost at actual Qty. Quanity variance is favorable when actual quantity used is less than budgeted quantity, and unfavorable when actual quantity used is more than budgeted quantty.