Question

Allan Products manufactures faux boulders to be used in various landscaping applications. A special resin is used to make the boulders. The standard quantity of resin used for each boulder is 17 pounds. Allan Products uses a standard cost of $2.30 per pound for the resin. The company produced 1,000 boulders in June. In that month, 16,400 pounds of resin were purchased at a total cost of $41,000. A total of 16,000 pounds were used in producing the boulderss in June. Read the reauirements Requirement 1. Calculate the direct material price variance. Begin by determining the formula for the price variance, then compute the price variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dolar Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM materials) Direct DM price variance x Requirement 2. Calculate the direct material quantity variance Detemine the formula for the quantity variance, then compute the quansity variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U)) DM quantity variance

Answer 1

11. Calculate the direct material price variance. Actual quantity purchased Actual price 16,400 $2.50 Standard price $2.30 = = DM price variance $3,280 U 2. Calculate the direct material quantity variance. Standard price (Actual quantity used $2.30 16.000 - Standard quantity allowed ) = 17,000 ) = DM quantity variance $2,300 F Explanation: Actual price ($41,000 / 16,400 pounds) = $2.50 per pound Standard quantity allowed (1,000 ~ 17) = 17,000 pounds