Question

the following standards have been established for a raw material used to make product O84

The following standards have been established for a raw material used to make product 084: Standard quantity of the material per unit of output Standard price of the material 8.1 meters $ 19.30 per meter The following data pertain to a recent month's operations: Actual material purchased Actual cost of material purchased Actual material used in production Actual output 4,400 meters $ 88,880 4.100 meters 600 units of product 084 The direct materials purchases variance is computed when the materials are purchased. Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Input all amounts as positive values.) a. Materials price variance b. Materials quantity variance

Answer 1

SOLUTION:

GIVEN :

STANDARD QUANTITY OF ACTUAL OUTPUT  = 8.1*600 =4860 meters

STANDARD RATE = $19.30 per meter

ACTUAL QUANTITY = 4100 meters

ACTUAL PRICE = $20.20 per meter

ACTUAL PRICE = ACTUAL COST OF MATERIAL PURCHASED/ ACTUAL MATERIAL PURCHASED

88880/4400=$20.20

ACTUAL OUTPUT = 600 units

Standard Quantity of Actual Output	Standard Price	Standard Cost of Actual Output	Actual Quantity	Actual Price	Actual Cost
4860	$19.30	$93798	4100	$20.20	$82820

1

MATERIALS PRICE VARIANCE = ACTUAL QUANTITY (STANDARD RATE - ACTUAL RATE)

= 4100(19.30-20.20)

= 4100(.9) = 3690 (U)

2

MATERIALS QUANTITY VARIANCE = STANDARD PRICE (STANDARD QUANTITY - ACTUAL QUANTITY) = 19.30 (4860-4100)

= 19.30(760) = 14668 (F)

(a)	MATERIALS PRICE VARIANCE	3690	U
(b)	MATERIALS QUANTITY VARIANCE	14668	F