Question

Kildare Company manufactures 100-pound bags of mulch that have the following unit standard costs for direct materials and direct labor: Direct materials (100 lbs. @ $0.40 per lb.) $40.00 Direct labor (0.5 hours at $18 per hour) 9.00 Total standard prime cost per 100-lb. bag $49.00 The following activities were recorded for October: • 2,000 bags were manufactured. • 190,000 lbs. of materials costing $70,000 were purchased. • 205,000 lbs. of materials were used. • $19,000 was paid for 950 hours of direct labor. There were no beginning or ending work-in-process inventories. What is the materials usage variance? a. $2,000 F b. $6,000 U c. $4,000 U d. $2,000 U

Answer 1

Option D is correct i.e. $2,000 U

Calculation:-

Material usage variance = (actual quantity - standard quantity) x std rate

= [205,000 - (2,000 x 100)] x 0.40

= 5,000 x 0.40

= $2,000 U