Question

Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses​ ammonia, and floor cleanser that uses bleach. Information for the most recent period​ follows:

Product Names	Window Cleaner​(ammonia)	Floor Cleaner​(bleach)
Direct materials information
Standard ounces per unit	16 oz.	24 oz.
Standard price​ (SP) per ounce	$ 0.25	​?
Actual quantity​ (AQ) used per unit	20 oz.	22 oz.
Actual price​ (AP) paid for material	$ 1.75	$ 0.72
Actual quantity purchased​ (AQP) and used	1,000 oz.	2,800 oz.
Price variance	​?	$ 56 U
Quantity variance	$4,900 U	​?
Flexible budget variance	​?	$ 504 F
Number of units produced	700	400

What is the direct materials flexible budget variance for​ ammonia?

A.

$6,400

favorable

B.

$6,400

unfavorable

C.

$3,400

unfavorable

D.

$3,400

favorable

Answer 1

Solution:

The correct answer is Option (B). $6,400 unfavorable

From the given data first we need to Calculate Direct Material Price Variance

Direct Material Price Variance = Actual Material Purchased(Actual Rate - Standard Rate)

Direct Material Price Variance = 1,000 * ($1.75 - $0.25)

= $1,500 (Unfavorable)

Then we Calculate,

Direct Material Flexible Budget Variance = Direct Material Price Variance + Direct Material Quantity Variance

Flexible Budget Variance for Ammonia = $1,500 (U) + $4,900 (U)

= $6,400(Unfavorable)