Ruby Company produces a chair that requires 6 yards of material per unit. The st
ID: 2430642 • Letter: R
Question
Ruby Company produces a chair that requires 6 yards of material per unit. The standard price of one yard of material is $11.20. During the month, 6,700 chairs were manufactured, using 41,000 yards at a cost of $10.64 per yard. Enter favorable variances as negative numbers.
(a)
Determine the price variance.
$(Favorable/Unfavorable)
(b)
Determine the quantity variance.
$(F/U)
(c)
Determine the cost variance.
$(F/U)
(a)
Determine the price variance.
$(Favorable/Unfavorable)
(b)
Determine the quantity variance.
$(F/U)
(c)
Determine the cost variance.
$(F/U)
Explanation / Answer
Answer to Part a)
Price Variance = (Actual Unit Cost – Standard Unit Cost) * Actual Quantity
Price Variance = ($10.64 - $11.20) * 41,000
Price Variance = 22,960 (Unfavourable)
Answer to Part b)
Quantity Variance = (Standard Quantity – Actual Quantity) * Standard Price
Standard Quantity = 6,700 * 6 = 40,200
Quantity Variance = (40,200 – 41,000) * $11.20
Quantity Variance = 8,960 (Unfavourable)
Answer to Part c)
Cost Variance = Price Variance + Quantity Variance
Cost Variance = 22,960 + 8,960
Cost Variance = 31,920 (Unfavourable)
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