Question

21 Coby Prochinhas Valve art 2 of 6 Required information The following information applies to the questions displayed below) Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labour-hours, and its standard costs per unit are as follows: 02:22:06 Direct materials: 5 kg at $9.00 per kg Direct labour: 3 hours at $14 per hour Variable overhead: 3 hours at $9 per hour Total standard cost per unit $ 45.00 42.00 27.00 Print $ 114.00 The company planned to produce and sell 20,000 units in March. However, during March the company actually produced and sold 24,800 units and incurred the following costs: a. Purchased 155,000 kg of raw materials at a cost of $7.20 per kg. All of this material was used in production b. Direct labour: 65,000 hours at a rate of $15 per hour. c. Total variable manufacturing overhead for the month was $612,300. 2. What is the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance.).) Materials quantity variance

Answer 1

Solution:

Computation of direct material quantity variance for month of March :

1. Standard quantity required per unit		5 kgs
2. Standard quantity required in for actual production (24,800 units )	SQ	1,24,000 kgs (24,800 units* 5 kgs)
3. Actual quantity required for actual production ( 24,800 units)	AQ	1,55,000 kgs
4. Actual price per kg	AP	$ 7.20
5. Standard price per kg	SP	$ 9.00

Direct Material Quantity variance

SQ* SP- AQ* SP 1,24,000 kgs*$ 9.00 -1,55,000 kgs *$ 9.00 $ 11,16,000 - $ 13,95,000 $ 2,79,000 U (Unfavorable)

Conclusion:

Material Quantity variance

$ 2,79,000 U (Unfavorable)

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