Hiilemeyer Company\'s standards for its Hunter model include 50 ounces of borolo
ID: 2384810 • Letter: H
Question
Hiilemeyer Company's standards for its Hunter model include 50 ounces of borolox at a cost of $6.30 per ounce. During May, the company purchased 56,000 ounces of borolox at a total cost of $351,680. The company produced 1,025 Hiilemeyer during May and used 53,500 ounces of borolox in the process. Calculate the material price variance and the material quantity variance.Answer
$1,120 favorable and $14,175 unfavorable
$14,630 favorable and $29,925 unfavorable
$1,070 favorable and $14,175 unfavorable
$1,120 favorable and $29,925 unfavorable
Explanation / Answer
According to the given information,
Actual Material purchased = 56,000 ounces
Used material = 53,500 ounces
Standard price = $6.30 per ounce
Actual price is calculated as
Actual price = $351,680 / 56,000
= $6.28
Therefore, the actual price is $6.28
The formula for calculating the Material price variance is
MPV = (Actual quantity purchased x Actual price) - (Actual quantity purchased x Standard price)
= Actual quantity purchased (Actual price - Standard price)
= 56,000 ($6.28 - $6.30)
= 1,120 favourable
If the actual material purchased is less than the standard material used, then the material price variance is favorable.
Computing the Material quantity variance:
MQV = (Actual quantity used x Standard price) - (Standard quantity allowed x Standard price)
Standard quantity allowed is calculated as
Standard quantity allowed = 1025 x 50
= 51,250
= Standard price (Actual quantity used - Standard quantity allowed)
= $6.30 (53,500 - 51,250)
= $6.30 (2,250)
= $14,175 Unfavourable
When the actual materials used is more than the standard quantity allowed, then unfavourable quantity variance occurs.
The correct option is a) $1,120 favorable and $14,175 unfavorable.
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