The following materials standards have been established for a particular product
ID: 2359659 • Letter: T
Question
The following materials standards have been established for a particular product: Standard quantity per unit of output.......3.8 lbs/Standard price.......$13.00 per lb.
The following data pertain to operations concerning the product for the last month: Actual materials purchased......2,700 lbs./ Actual cost of materials purchased......$34,155/ Actual materials used in production 2000 lbs./ Actual output.......500 units.
a.What is the materials price variance for the month?
b.What is the materials quantity variance for the month?
include equations......
Explanation / Answer
a)
Standard cost is $13.40 per meter
Actual cost was ($60,500 / 4,400 ) = $ 13.75 per meter, so the variance is favorable.
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Materials price variance
= AQ * (AP - SP)
= 4,400 * ($13.75 - $14.40)
= 4,400 * ( - $ 0.65 )
= - $2,860
[ The material price variance was $2,860 F ]
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AQ = Actual quantity purchased
AP = Actual price
SP = Standard price
b)
SQ = STANDARD QUANTITY PER UNIT X ACTUAL OUTPUT
= 3.8 * 500
= 1900
materials quantity variance =
= SP(AQ - SQ)
= 13 * (2000 - 1900)
= 1300
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