Question

Standard Product Cost, Direct Materials Variance

H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (7,650 pounds) has the following standards:

	Standard Quantity		Standard Price
Whole tomatoes	5,000	lbs.	$0.75	per lb.
Vinegar	350	gal.	0.90	per gal.
Corn syrup	40	gal.	7.50	per gal.
Salt	125	lbs.	1.80	per lb.

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch 08-99 were as follows:

4,900 lbs. of tomatoes

375 gal. of vinegar

36 gal. of corn syrup

140 lbs. of salt

a. Determine the standard unit materials cost per pound for a standard batch. Round the per unit answer to the nearest whole cent.

Ingredient	Standard Cost per Batch
Whole tomatoes	$
Vinegar
Corn syrup
Salt
Total	$
Standard unit materials cost per pound	$

b.  Determine the direct materials quantity variance for batch 08-99. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Ingredient	Materials Quantity Variance	Favorable/Unfavorable
Tomatoes	$
Vinegar
Corn syrup
Salt
Total direct materials quantity variance	$

Answer 1

Requirement A Standard Unit material cost per pound: * Standard price Whole Tomatoes Vinegar Corn Syrup Standard Quantity 5000 lbs 350 gal. 40 gal. 125 lbs 0.75 per lbs = 0.9 per gal. = 7.5 per gal. = 1.8 per lbs = Standard cost per batch 3,750.00 315.00 300.00 225.00 Salt Total standard cost (A) Pounds per Batch (B) Unit cost per pound (A/B) 4,590.00 7650 0.60 Per lb Requirement B Computation of Material Quantity Variance : Actual Quantity Standard quantity = Quantity difference * 5000 = -100 * 350 = 25 * 40 = 125 = 15 4900 - 375 - 36 - 140 - Standard price = 0.75 = 0.9 = 75 = 1.8 = Material Quantity variance (75.00) F 22.50 U (30.00) F 27.00 U F= Favourable U = Unfavourable Total Direct material quantity variance (55.50) F