Acme Company\'s production budget for August is 17.700 units and includes the fo

Question

Acme Company's production budget for August is 17.700 units and includes the following component unit costs: direct materials, $6.00: direct labor. $10.20; variable overhead. $6.20. Budgeted fixed overhead is $34,000. Actual production in August was 18,630 units, actual unit component costs incurred during August include direct materials. $8.40: direct labor. $9.60; variable overhead, $7.00. Actual fixed overhead was $35,700. the standard direct material cost per unit consists of 12 pounds of raw material at $0.5 per pound. During August. 391, 230 pounds of raw material were used that were purchased at $0.40 per pound. Required: Calculate the materials price variance and materials usage variance for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Explanation / Answer

Material Price Variance = Actual Quantity (Standards Price - Actual Price)

= 391,230 (0.5 - 0.4)

= 39,123 (F)

Material Usage Variance = Standard Price (Standard Quantity - Actual Quantity

= 0.5 (12 * 17,700 - 391,230)

= 0.5 (212,400 - 391,230)

= 89,412 (U)

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