Tercer reports the following for one of its products. AQ = Actual Quantity SQ =

Question

Tercer reports the following for one of its products.

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

Compute the direct materials price and quantity variances and classify each as favorable or unfavorable.

Direct materials standard (4 lbs. @ $2 per lb.) $ 8 per finished unit Actual direct materials used (AQ) 300,000 lbs. Actual finished units produced 60,000 units Actual cost of direct materials used $ 535,000

AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price

Compute the direct materials price and quantity variances and classify each as favorable or unfavorable.

Actual Cost 0 0 Standard Cost AQ x AP AQ x SP SQ x SP x 0 x x $0 0 $0 $0 0

Explanation / Answer

Answers

Actual Cost

Standard Cost

AQ

x

AP

AQ

x

SP

SQ

x

SP

                            300,000

x

$                1.783333

                               300,000

x

$                                                            2.00

               240,000

x

$               2.00

$             535,000.00

$                                               600,000.00

$ 480,000.00

Material Price Variance

$                     65,000.00 Favourable [ 600000 – 535000]

Material Quantity Variance

$                   120,000.00 Unfavourable [480000 – 600000]

Material Cost Variance

Material Price Variance

$                        65,000.00

Favourable

Material Quantity Variance

$                     120,000.00

Unfavourable

Material Cost (or Spending) Variance

$                        55,000.00

Unfavourable

Actual Cost

Standard Cost

AQ

x

AP

AQ

x

SP

SQ

x

SP

                            300,000

x

$                1.783333

                               300,000

x

$                                                            2.00

               240,000

x

$               2.00

$             535,000.00

$                                               600,000.00

$ 480,000.00

Material Price Variance

$                     65,000.00 Favourable [ 600000 – 535000]

Material Quantity Variance

$                   120,000.00 Unfavourable [480000 – 600000]

Material Cost Variance

Material Price Variance

$                        65,000.00

Favourable

Material Quantity Variance

$                     120,000.00

Unfavourable

Material Cost (or Spending) Variance

$                        55,000.00

Unfavourable

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