Vernon Fruit Drink Company planned to make 198,000 containers of apple juice. It

Question

Vernon Fruit Drink Company planned to make 198,000 containers of apple juice. It expected to use two cups of frozen apple concentrate to make each container of juice, thus using 396,000 cups of frozen concentrate. The standard price of one cup of apple concentrate is $0.24. Vernon actually paid $117,151 to purchase 403,970 cups of concentrate, which was used to make 199,000 containers of apple juice. Required: b. Compute the actual price per cup of concentrate. (Round your answer to 2 decimal places.) c. Compute the standard quantity (number of cups of concentrate) required to produce the containers. d. Compute the materials price variance and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance). Round "Price variance" to 2 decimal places.) e. Compute the materials usage variance and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect i.e., zero variance). Round "Usage variance" to 2 decimal places.) b. Actual price c. Standard quantity d. Total price variance e. Total usage variance per cup cups

Explanation / Answer

Solution a:

Actual price per cup of concentrate = $117,151/403970 = $0.29 per cup

Solution b:

Standard quantity for actual production = Actual production * Standard quantity per container = 199000 * 2 = 398000 cups

Solution c:

Material price variance = (SP - AP) * AQ = ($0.24 - $0.29) * 403970 = $20,198.50 U

Solution d:

Material usage variance = (SQ - AQ) * SP = (398000 - 403970) * $0.24 = $1,432.80 U

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