Question

Awesome Manipulation Manufacturing's (AMM) standards anticipate that there will be 6 pounds of raw material used for every unit of finished goods produced. AMM began the month of May with 3,000 pounds of raw material, purchased 29,000 pounds for $34,800 and ended the month with 2,200 pounds on hand. The company produced 4,800 units of finished goods. The company estimates standard costs at $1.30 per pound. The materials price and efficiency variances for the month of May were: Efficiency Variance Price Variance O 1. $2,980 F $1,300 U 2. $2,900 U $1,300 F 3. $2,900 F $1,300 U 4. $2,900 F $0

Answer 1

Correct answer-----------(1) $2,980 F and $1,300 U

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.30	-	$                     1.20	)	x	29800
	2980
	Variance		$             2,980.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	28800	-	29800	)	x	$              1.30
	-1300
	Variance		$             1,300.00			Unfavourable-U

.

Standard DATA for		4800	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 6 Pounds x 4800 Units)=28800 Pounds	$              1.30	$            37,440.00

.

		4800	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	29800	$            1.20	$          35,760.00