Question

Robnett Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company’s only product is as follows:

Inputs	Standard Quantity or Hours		Standard Price or Rate			Standard Cost
Direct materials	3.8	liters	$	6.50	per liter	$	24.70
Direct labor	0.60	hours	$	18.00	per hour		10.80
Fixed manufacturing overhead	0.60	hours	$	18.50	per hour		11.10
Total standard cost per unit						$	46.60

During the year, the company completed the following transactions:

a. Purchased 106,900 liters of raw material at a price of $6.80 per liter.

b. Used 93,760 liters of the raw material to produce 24,700 units of work in process.

Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.

Cash

Raw Materials

Work in Process

Finished Goods

PP&E (net)

=

Materials Price Variance

Materials Quantity Variance

Labor Rate Variance

Labor Efficiency Variance

FOH Budget Variance

FOH Volume Variance

Retained Earnings

1/1

$1,110,000

$54,340

$0

$60,580

$616,800

=

$0

$0

$0

$0

$0

$0

$1,841,720

a.

=

b.

=

When the raw materials used in production are recorded in transaction (b) above, which of the following entries will be made?

$650 in the Materials Quantity Variance column

($650) in the Materials Price Variance column

($650) in the Materials Quantity Variance column

$650 in the Materials Price Variance column

Answer 1

Material Quantity variance is computed for material used in production

Material Quantity Variance = (Standard Quantity – Actual Quantity Used)*Standard Price

= (24,700*3.8 – 93,760)*6.50

= $650 favorable

Hence, the answer is

($650) in the Materials Quantity Variance column

Since the variance is favourable