Question

Standard Product Cost, Direct Materials Variance Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,900 pounds) has the following standards: Standard Quantity Standard Price Whole tomatoes 4,800 lbs. $ 0.46 per lb. Vinegar 270 gal. $ 2.80 per gal. Corn syrup 23 gal. $ 10.20 per gol. Salt 108 lbs. $ 2.60 per Ib. The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-111 were as follows: 5,000 lbs. of tomatoes 259 gal. of vinegar 24 gal. of corn syrup 107 lbs. of salt

Answer 1

A) Determination of Standard unit material cost per pound for a standard batch.

Ingredient	Calculation	Standard Cost per batch
Whole tomato	4,800 lbs $\times$ $ 0.46 per lb	$ 2,208
Vinegar	270 gal $\times$ $ 2.80 per gal	$ 756
Corn Syrup	23 gal $\times$ $ 10.20 per gal	$ 234.6
Salt	108 lbs $\times$ $ 2.6 per lb	$ 280.8
	Total Cost per batch	$ 3,479.4
	Total pounds in a batch	2,900
	Standard unit material cost/pound	($3,479.4 $\div$ 2,900)    $1.20

B) Direct material quantity variance

Ingredient	Material Quantity Variance	Amount	Favorable/Unfavorable
Whole tomato	$ 0.46 $\times$ (5,000 - 4,800) lbs	- $ 92.0	Unfavorable
Vinegar	$ 2.8 $\times$ (259 - 270) gal	+ $ 30.8	Favorable
Corn Syrup	$10.2 $\times$ (24 -23 ) gal	- $10.2	Unfavorable
Salt	$ 2.6 $\times$ (107 - 108) lbs	+ $ 2.6	Favorable
	Total	$68.8	Unfavorable