Sonne Company produces a perfume called Whim. The direct materials and direct la

Question

Sonne Company produces a perfume called Whim. The direct materials and direct labor standards for one bottle of Whim are given below: During the most recent month, the following activity was recorded: Twenty thousand ounces of material were purchased at a cost of $2.40 per ounce. The company produced only 2,000 bottles using 16,000 ounces of material. The rest of the material purchased remained in raw materials inventory. Nine hundred hours of direct labor time were recorded at a total labor cost of $10,800. Compute the direct materials price and quantity variances for the month. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.) Direct materials price variance $ 2000 F Direct materials quantity variance $ U

Explanation / Answer

Hi,

Please find the answer as follows:

MPV = 20000 *(2.4-2.5) = 2000 F

MQV = 2.5*(16000 - 7.2*2000) = 4000 (U)

Thanks.

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