Pardoe, Inc., manufactures a single product in which variable manufacturing over
ID: 2480297 • Letter: P
Question
Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard Quantity Standard Price or Rate Standard Cost Direct materials 2.5 pounds $7.25 per pound $18.125 Direct labor 0.5 hours $23 per hour $11.5 Variable manufacturing overhead 0.5 hours $5.50 per hour $2.75 During March, the following activity was recorded by the company: • The company produced 6,400 units during the month. • A total of 20,200 pounds of material were purchased at a cost of $56,560. • There was no beginning inventory of materials on hand to start the month; at the end of the month, 4,040 pounds of material remained in the warehouse. • During March, 3,400 direct labor-hours were worked at a rate of $23.50 per hour. • Variable manufacturing overhead costs during March totaled $9,550. The direct materials purchases variance is computed when the materials are purchased.
The materials quantity variance for March is:
$1,160 F
$1,160 U
$32,160 U
$32,160 F
Explanation / Answer
Material quantity variance = (Standard Quantity – Actual Quantity) x Standard Rate
Standard Quantity = Standard Quantity Required for Actual Production
= 2.5 pounds x 6,400
= $ 16,000 pounds
Actual quantity = Quantity purchased – Ending Quantity
= 20,200 – 4,040
= 16,160 pounds
Material Quantity variance = ( 16,000 – 16,160) x 7.25
= -160 x 7.25
= - $ 1,160 U
The material quantity varience for Maerch is: $ 1,160 U
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