Question

Manzana Company produces apple juice sold in gallons. Recently, the company adopted the following material standard for one gallon of its apple juice:

     Direct materials 128 oz. @ $0.05 = $6.40

During the first week of operation, the company experienced the following results:

1. Gallon units produced: 20,000.
2. Ounces of materials purchased and used: 2,650,000 ounces at $0.045.
3. No beginning or ending inventories of raw materials.

Required:

Note: Enter favorable values as negative numbers. Enter unfavorable values as positive numbers.

1. Compute the materials price variance.
$ Favorable

2. Compute the materials usage variance.
$ Unfavorable

3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $20,000 unfavorable. The company purchased and used 2,000,000 ounces of material during this week. How many gallons of juice were produced?
gallons

What was the actual price paid per ounce of materials? Round your answer to the nearest cent.
$ per ounce

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

Answer 2 Part 1) 3 Material Price Variance = (actual Price-standard Price) * Actual Qty 4 = (.045-.05)*2650000 5 = $ 13250 Favourable 6 Thus the correct answer is $ 13250 Favourable 8 Part 2) 9 Material Usage Variance = (Actual Qty- Standard Qty) *Standard Price 10 = (2650000-(128*20000))*.05 11 = $ 4500 Unfavourable 12 Thus the correct answer is $ 4500 Unfavourable 14 Part 3) 15 Material Usage Variance = (Actual Qty- Standard Qty) *Standard Price 16 4000 = (2000000 - (gallon produced 128))*.05 17 4000/.05 = 2000000-(gallon produced*128) 18 2000000-80000 = gallom produced 128 19 1920000/128 = gallon produced 20 15000 = gallon produced 22 Material Price Variance = (actual Price-standard Price) Actual Qty 23 20000 = (actual Price -0.05)*2000000 24 20000/2000000 = actual Price -0.05 25 0.01 = actual Price -0.05 26 0.01+0.05 = actual Price 27 0.06 = actual Price 29 Thus the final answer 30 No. of galoons produced = 15000 Units 31 Actual Price Per Ounce of Material = $0.06 per ounce 32