Question

Materials Variances Krumple Inc. produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.5 ounces of aluminum per can. During the month of April, 305,000 cans were produced using 1,250,000 ounces of aluminum. The actual cost of aluminum was $0.2 per ounce and the standard price was $0.14 per ounce. There are no beginning or ending inventories of aluminum. Required: Calculate the materials price and usage variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable. Materials Price Variance Material Usage Variance

Answer 1

Answer)

Calculation of Material variances for Krumple Inc.

Data for Material Variance:

Particulars	Standard			Actual
	Quantity (in ounce)	Cost per ounce	Total Cost	Quantity (in ounce)	Cost per ounce	Total Cost
Materials	1,372,500	$ 0.14	$ 192,150	1,250,000	$ 0.20	$ 250,000
Total	1,372,500		$ 192,150	1,250,000		$ 250,000

Calculation of Material Variances:

Material price variance = (Standard Price per ounce – Actual price per ounces) X Actual quantity

                                           = ($ 0.14 – $ 0.20) X 1,250,000 ounces

Material price variance = $ 75,000 (Unfavourable)

Material usage variance = (Standard Quantity – Actual Quantity) X Standard price per ounce

                                             = (1,372,500 – 1,250,000) X $ 0.14

Material usage variance = $ 17,150 (Favourable)

Working Notes:

Standard Quantity for Actual output = Standard quantity per unit of output X Total number of units of output

                                                                            = 4.50 ounce per can X 305,000 cans

                                                                             = 1,372,500 Ounces.

Standard Material Cost = Standard quantity for actual output X Standard cost per ounce

                                           = 1,372,500 ounces X $ 0.14 per ounce

                                          = $ 192,150

Actual Material Cost = Actual quantity consumed X Actual cost per ounce

                                           = 1,250,000 ounces X $ 0.20 per ounce

                                          = $ 250,000

Answer)

Calculation of Material and labour variances for Deporte Company

Particulars	Standard			Actual
	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Material	72,000 pounds	$ 0.95 per pound	$ 68,400	79500 pounds	$ 0.93509 per pound	$ 74,340
Labour	22,500 labour hours	$ 7.40 per labour hour	$ 166,500	22450 labour hours	$ 7.64160 per labour hour	$ 171,554
Total			$ 234,900			$ 245,894

Calculation of Material Variances:

Material price variance = (Standard Price per pound – Actual price per pound) X Actual quantity

                                           = ($ 0.95 – $ 0.93509) X 79,500 pounds

Material price variance = $ 1,185.35 or $ 1,185 (Favourable)

Material usage variance = (Standard Quantity – Actual Quantity) X Standard price per pound

                                             = (72,000 pounds – 79,500 pounds) X $ 0.95 per pound

Material usage variance = $ 7,125 (Unfavourable)

Calculation of Labour Variances:

Labour rate variance = (Standard rate per direct labour hour – Actual rate per direct labour hour) X Actual direct labour hours

                                           = ($ 7.40 – $ 7.64160) X 22,450 direct labour hours

Labour rate variance = $ 5,423.92 or $ 5,424 (Unfavourable)

Labour Efficiency variance = (Standard direct labour hours – Actual direct labour hours) X Standard rate per direct labour hour

                                             = (22,500 direct labour hours – 22,450 Direct labour hours) X $ 7.40 per direct labour hour

Labour efficiency variance = $ 370 (Favourable)

Working Notes:

Material

Standard Quantity for Actual output = Standard quantity per unit of output X Total number of units of output

                                                                            = 2.40 pounds per batch X 30,000 batches

                                                                             = 72,000 pounds

Standard Material Cost = Standard quantity for actual output X Standard cost per pound

                                           = 72,000 pounds X $ 0.95 per pound

                                          = $ 68,400

Labour

Standard labour hours for Actual output = Standard Labour hours per unit of output X Total number of units of output

                                                                            = 0.75 direct labour hours per batch X 30,000 batches

                                                                             = 22,500 direct labour hours

Standard labour Cost = Standard direct labour hours for actual output X Standard cost per direct labour hour

                                             = 22,500 direct labour hours X $ 7.40 per direct labour hour

                                             = $ 166,500