Question

3. Variance Analysis (12 points). The Russell Company provides the following standard cost data per unit of product: Standard costs: Direct material per unit: 4 gallons $5.00 per gallon Actual costs for producing and selling 25,000 units: Direct materials 102,000 gallons at $4.90 per gallon S/M = $ per unit 5.00/ From the information given above, calculate the following variances. Be sure to circle For U to indicate whether each Direct Material (DM) variance is favorable (F) or Unfavorable (U). = 1. DM Price Variance: 2. DM Quantity Variance: For U 3. Overall DM Variance: SA-44.90 QA- 25,000 _F or u Foru $S - $5.00 QA-25,000 u $5 - $5.00 QS-

Answer 1

Required 1 Material price Variance (actual price- standard price) x Actual quantity [4.9-5)x 102,000 $ (10,200) $ 10,200 Favorable Actual price is Less than standard price, Thus favorable Required 2 Material Quantity Variance = (actual qty used -standard Qty) x standard Rate (102,000-(4x 25000)) x 5 (102,000 100,0o0) x 5 10,000 Unfavorable Actual material used is higher than standard material required, Thus Unfavorable Required 3 Total Material Variance Actual material cost -standard material cost (102,000 x $4.90)-( (25,000 x 4) x$ 5) 499,800 500,000 (200.00) 200.00 Favorable Actual material cost is lesser than standard material cost, Thus favorable Please comment if you have any doubt Please give feed back

Total Material Variance =  Material price Variance + Material Quantity Variance

= 10,200 favorable + 10,000 unfavorable

= 200 favorable