Question

Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,800 pounds) has the following standards:

	Standard Quantity		Standard Price
Whole tomatoes	4,700	lbs.	$0.45	per lb.
Vinegar	260	gal.	2.70	per gal.
Corn syrup	22	gal.	10.00	per gal.
Salt	104	lbs.	2.50	per lb.

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch 08-99 were as follows:

4,900 lbs. of tomatoes

250 gal. of vinegar

23 gal. of corn syrup

103 lbs. of salt

a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.

Ingredient	Standard Cost per Batch
Whole tomatoes	$
Vinegar
Corn syrup
Salt
Total	$
Standard unit materials cost per pound	$

b.  Determine the direct materials quantity variance for batch 08-99. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Ingredient	Materials Quantity Variance	Favorable/Unfavorable
Whole tomatoes	$
Vinegar
Corn syrup
Salt
Total direct materials quantity variance	$

Answer 1

Requirement A Standard Unit material cost per pound: * Standard price Whole Tomatoes Vinegar Corn Syrup Salt Standard Quantity 4700 lbs 260 gal. 22 gal. 104 lbs 0.45 per lbs = 2.7 per gal. = 10 per gal. = 2.5 per lbs = Standard cost per batch 2,115.00 702.00 220.00 260.00 Total standard cost (A) Pounds per Batch (B) Unit cost per pound (A/B) 3,297.00 2800 1.18 Per lb Requirement B Computation of Material Quantity Variance : Actual Quantity F Standard quantity = Quantity difference * 4700 = 200 * 260 = 22 = 4900 - 250 - 23 - 103 - -10 * Standard price = 0.45 = 2.7 = 10 = 2.5 = : Favourable U = Unfavourable Material Quantity variance 90.00 U (27.00) F 10.00 U (2.50) F 104 = Total Direct material quantity variance 70.50 U