Question

Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The per-unit standard costs for direct materials and direct labor for its single product are as follows: Materials: (5 kilograms x $10 per kilogram) (4 hours x $17 per hour) $ 50 Labor: 68 All materials are issued at the beginning of processing. The operating data shown below were taken from the records for July: In-process beginning inventory none In-process ending inventory-90% complete as to labor Units completed during the month Budgeted output Purchases of materials, in kilograms (AQ) 1,100 units 7,300 units 7,500 units 38,000 $517,000 Total actual labor costs incurred Direct labor hours worked (AQ) Materials purchase-price variance Increase in materials inventory in July 37,000 hours $3,000 unfavorable 1,400 kilograms 0 kg Beginning inventory of materials The direct materials usage variance for July, to the nearest dollar, was:

Multiple Choice

• $3,000 favorable.

• $54,000 favorable.

• $23,000 unfavorable.

• $26,000 unfavorable.

Answer 1

Material usage variance = (standard quantity - actual quantity)*standard rate

= { (7300+1100)*5-(38000-1400)}*10

= $54000 Favorable