Question

Materials Variances
Assume that Pearle Vision uses standard costs to control the materials in its made-to-order sunglasses. The standards call for 2 ounces of material for each pair of lenses. The standard cost per ounce of material is $16.25. During July, the Santa Clara location produced 5,200 pairs of sunglasses and used 9,800 ounces of materials. The cost of the materials during July was $17.00 per ounce, and there were no beginning or ending inventories.
Required
a. Determine the flexible budget materials cost for the completion of the 5,200 pairs of glasses.
$Answer

b. Determine the actual materials cost incurred for the completion of the 5,200 pairs of glasses and compute the total materials variance.
$Answer actual materials cost

$AnswerAnswerUF total materials variance

c. How much of the total variance was related to the price paid to purchase the materials?
$AnswerAnswerUF

d. How much of the difference between the answers to requirements (a) and (b) was related to the quantity of materials used?

$AnswerAnswerUF

Answer 1

a). Flexible budget materials cost for the completion of the 5,200 pairs
= 5200 pairs * 2 ounces * $16.25
= $169,000

b). Actual materials cost incurred for the completion of the 5,200 pairs.
= Actual material used * Actual rate
= 9800 ounces * $17
= $166,600

Total Material Variance = Flexible budget material cost for actual production - Actual material cost
= $169,000 - $166,600
= $2,400 F

c). Total variance was related to the price paid to purchase the materials.
Material price variance = (Standard price - Actual price) * Actual quantity
= ($16.25 - $17) * 9800 ounces
= $7,350 U

d). Material quantity variance = (Standard qty for actual production - Actual quantity ) * Standard rate
= (5200 * 2 ounces - 9800 ounces) * $16.25
= (10400 ounces - 9800 ounces) * $16.25
= $9,750 F