(55) r 10 10 Quiz Palm connect.htm Help Turrubiates Corporation makes a product

Question

(55) r 10 10 Quiz Palm connect.htm Help Turrubiates Corporation makes a product that uses a material with the following standards 1 Standard quantity 6.7 liters per unit Standard price$1.20 per liter Standard cost 2 $8.04 per unit The company budgeted for production of 2,500 units in April, but actual production was 2,600 units. The company used 18,000 liters of direct material to produce this output. The company purchased 18,800 liters of the direct material at $1.3 per liter The direct materials purchases variance is computed when the materials are purchased The materials quantity variance for April is: $754 U

Explanation / Answer

Standard quantity of material required for the actual production of 2600 units = 2600*6.7=17,420 litres

Standard price litre = $ 1.20

Actual quantity = 18,000 litres

Actual price per litre = $ 1.30

Material cost variance = Standard material cost-Actual material cost

=(17,420*1.20) – (18,000*1.3)

= 20,904 – 23,400 = (-) 2,496 (Unfavourable)

Material price variance = Actual quantity ( Standard price per litre – Actual price per litre) = 18,000 ( 1.20 – 1.30 ) = (-)1,800 (Unfavourable)

Material quantity variance =Standard price per litre (Standard quantity – Actual quantity)

= 1.20 ( 17,420 - 18,000 )

= (-) 696 (Unfavourable)

Verification:

Material cost variance =Material price variance+Material usage variance

-2,496 = -1800-696

So answer is $ 694 Unfavourable

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