Question

Sitka Industries uses a cost system that carries direct materials inventory at a standard cost. The controller has established these standards for one ladder (unit):

	Standard Quantity	x	Standard Price	=	Standard Cost
Direct materials	3 pounds		$4.40 per pound		$13.20
Direct labor	2.00 hours		12.00 per hour		24.00
Total cost					$37.20

Sitka Industries made 2,900 ladders in July and used 8,400 pounds of material to make these units. Sitka Industries bought 15,400 pounds of material in the current period. There was a $250 unfavorable direct materials price variance.

Enter all amounts as positive numbers.

A. How much in total did Sitka pay for the 15,400 pounds?

Amount paid $

B. What is the direct materials quantity variance?

Direct materials quantity variance $  

C. What is the total direct materials cost variance?

Total direct materials cost variance $  

D. What if 9,300 pounds were used to make these ladders, what would be the direct materials quantity variance?

Direct materials quantity variance $  

E. If there was a $350 favorable direct materials price variance, how much did Sitka pay for the 15,400 pounds of material?

Amount paid $

Answer 1

(A)

Material price variance = actual quantity x (standard price - actual price)

-$250 = 15400 x ($4.40 - actual price)

-$250/15400 = $4.40 - actual price

actual price = $4.40 + 0.02

= $4.42

Therefore,

actual price paid for 15400 pounds = 15400 x $4.42

= $68068

(B)

Material quantity variance = standard price x (standard quantity - actual quantity)

= $4.40 x (8700 - 8400)

= $1320 Favorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 2900 x 3 = 8700 pounds

(C)

Total direct material variance = (standard quantity x standard price) - (actual quantity x actual price)

= (8700 x $4.40) - (8400 x $4.42)

= $38280 - $37128

= $1152 Favorable

(D)

Material quantity variance = standard price x (standard quantity - actual quantity)

= $4.40 x (8700 - 9300)

= $2640 Unfavorable