The standard cost of Product B manufactured by MIT Company includes 3.00 units o
ID: 2473855 • Letter: T
Question
The standard cost of Product B manufactured by MIT Company includes 3.00 units of direct materials at $5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70 per unit, and 29,000 units of direct materials are used to produce 9,500 units of Product B.
(a) Compute the total materials variance and the price and quantity variances.
b) Repeat, assuming the purchase price is $5.15 and the quantity purchased and used is 28,000 units.
(a)
Actual service time
Setup and downtime
Cleanup and rest periods
Standard DL hrs per oil change
(b)
Hourly wage rate
Payroll taxes ($12 X 10%)
Fringe benefits ($12 X 25%)
Standard DL hourly rate
(c)
Standard DL cost per oil change =
(d)
Direct labor quantity variance =
(a)
Actual service time
Setup and downtime
Cleanup and rest periods
Standard DL hrs per oil change
Explanation / Answer
a)
Material Price Variance
= (Actual price – standard price) x actual purchase
= ($4.70/unit - $5/unit) x 29000 pounds
= $8700 F
Standard usage for actual production
= actual production x standard rate of usage of material
= 9500 units x 3units/unit of B
= 28500 units
Material Quantity Variance
= (actual usage – standard usage) x standard price
= (29000 pounds – 28500 pounds) x $5 / unit
= $2500 U
Total Material Variance
= Actual cost – standard cost
= 29000 units x $4.70/unit – 28500 units x $5/unit
= $136300 - $142500
=$6200 F
b)
Material Price Variance
= (Actual price – standard price) x actual purchase
= ($5.15/unit - $5/unit) x 28000 pounds
= $4200 U
Standard usage for actual production
= actual production x standard rate of usage of material
= 9500 units x 3units/unit of B
= 28500 units
Material Quantity Variance
= (actual usage – standard usage) x standard price
= (28000 pounds – 28500 pounds) x $5 / unit
= $2500 U
Total Material Variance
= Actual cost – standard cost
= 28000 units x $5.15/unit – 28500 units x $5/unit
= $144200 - $142500
=$1700 U
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