Question

4. Use the information presented below to answer the three questions that follow CBD Company produces goods for inventory and subsequent seat has the standard well as the actual costs incurred in its production process. Standard price for raw materials purchased - $5 per lb. - 54.80 per lb Actual Quantity of materials used in production - 5,200 lbs. Actual price for materials used for production Actual quantity of units produced - 2,400 Note: the standard quantity used to produce a unit is 2 lbs. Required: Indicate Favorable Variance by F and Unfavorable Variance by UF. a. Compute the Materials Price Variance. Show computation b. Compute Materials Quantity Variance. Show your computation. C Compute the Total Variance. Show your computation.

Answer 1

a. The material Price variance is as calculated as follows:

Material Price variance = (Actual price - Standard price) * Actual quantity

= ($4.80 - $5) * 5,200 lbs.

= -$0.20 * 5,200 lbs.

= -1,040 F

Since the actual price is less than the standard price material is considered as Favorable.

b. Material Quantity variance = (Actual Quantity - Standard Quantity) * Standard price

= (5,200 lbs. - 4,800 lbs.) * $5

= 2,000 UF

since the actual quantity used is greater than the standard quantity, the material quantity variance is considered unfavorable.

c. Total variance = Material price variance + Material quantity variance

= -$1,040 F + $2,000 UF

= $960 UF

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