For 5 Pts: Nixon Co. uses a standard cost system with the following information

Question

For 5 Pts: Nixon Co. uses a standard cost system with the following information for the previous Actual price per pound Actual lbs. of material used Actual hourly labor rate Actual hours of production period. The direct materials quantity variance is: $1.70 $21.00 $1.75 60,000 $20.00 8800 Units Completed during period Std. price per pound Std. Ibs. per completed unit Std. hourly labor rate Std. time per completed unit 2.5 1/3 hour 25,200 A. $5,250 Favorable B. $5,100 Unfavorable C. $5,250 Unfavorable D. $5,100 Favorable Rts Nixon Co uses a standard cost system

Explanation / Answer

Direct material quantity variance

= Standard quantity x Standard price – Actual quantity x Standard price

Standard quantity for actual production

= Standard quantity per unit x Number of units

= 2.5 x 25,200

= 63,000 pounds

So, Direct material quantity variance

= 63,000 x $1.70 – 60,000 x $1.70

= $5,100 Favorable

The variance is favorable as the actual quantity of materials used is less than the standard quantity required

So, as per above calculations, option D is the correct option

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