E22-5 The standard cost of Product B manufactured by Mateo Company includes thre

Question

E22-5

The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B.



Compute the total materials variance and the price and quantity variances.
Total materials variance $
Materials price variance $
Materials quantity variance $





Repeat the question above, assuming the purchase price is $5.20 and the quantity purchased and used is 26,200 units.
Total materials variance $
Materials price variance $
Materials quantity variance $

Explanation / Answer

Standard Quantity for Actual output x Standard Price/unit = (9000 x 3 x 5) = $135,000 Actual Quantity for Actual output x Standard Price/unit = (28000 x 5) = $140,000 Actual Quantity for Actual output x Actual Price/unit = (28000 x 4.7) = $131600 Total materials variance = 135000 - 131600 = 3400 Favourable Materials price variance = 140000 - 131600 = 8400 Favourable Materials quantity variance = 135000 - 140000 = 5000 Unfavourable ________________________________________________________________________ If the purchase price is $5.20 and the quantity purchased and used is 26,200 units. Standard Quantity for Actual output x Standard Price/unit = (9000 x 3 x 5) = $135,000 Actual Quantity for Actual output x Standard Price/unit = (26200 x 5) = $131,000 Actual Quantity for Actual output x Actual Price/unit = (26200 x 5.20) = $136,240 Total materials variance = 135000 - 136240 = 1240 Unfavourable Materials price variance = 131000 - 136240 = 5240 Unfavourable Materials quantity variance = 135000 - 131000 = 4000 Favourable

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