Ceelo Company purchased (at a cost of $20,880) and used 3,600 pounds of material

Question

Ceelo Company purchased (at a cost of $20,880) and used 3,600 pounds of materials during May. Ceelo’s standard cost of materials per unit produced is based on 1 pounds per unit at a cost $6.00 per pound. Production in May was 3,510 units.

(a)

Compute the total, price, and quantity variances for materials. (Round answers to 0 decimal places, e.g. 125.)

Total Materials Variance $ Neither favorable nor unfavorableUnfavorableFavorable Materials Price Variance $ Neither favorable nor unfavorableUnfavorableFavorable Materials Quantity Variance $ FavorableNeither favorable nor unfavorableUnfavorable

Explanation / Answer

Material Price variance = ( Standard Price - Actual Price ) * Actual Quantity

= ( 6 - (20880/3600))*3600

= ( 6 - 5.80)*3600 i.e 720 favourable

Material quantity variance = ( Stanadrd Quantity - Actual Quantity ) * Standard price

= ( 3510-3600)*6 i.e 540 Unfavourable

Total Material variance = Material price variance - Material quantity variance

= 720 - 540 i.e 180 favourable

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