Exercise 23-5 The standard cost of Product B manufactured by Pharrell Company in
ID: 2519115 • Letter: E
Question
Exercise 23-5
The standard cost of Product B manufactured by Pharrell Company includes 3.5 units of direct materials at $5.4 per unit. During June, 27,300 units of direct materials are purchased at a cost of $5.15 per unit, and 27,300 units of direct materials are used to produce 7,700 units of Product B.
(a)
Compute the total materials variance and the price and quantity variances.
(b)
Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.50 and the quantity purchased and used is 26,800 units.
Neither favorable nor unfavorableFavorableUnfavorable
Materials price variance $Neither favorable nor unfavorableFavorableUnfavorable
Materials quantity variance $Neither favorable nor unfavorableFavorableUnfavorable
Explanation / Answer
(a)
SP=$5.40 (given)
SQ= 26950(7700@3.50per)
AP=$5.15(given)
AQ=27300 (given)
Total materials variance = SQ*SP-AQ*AP = (26950*$5.40) – (27300*$5.15)
= $4935 (Favourable)
Material Price variance = AQ(SP-AP), or 27300($5.40-$5.15) =$6825 (Favorable)
Material Quantity variance = SP(SQ-AQ), or $5.40(26950-27300) =-$1890 (Unfavorable)
(b). If the purchase price is $5.50 and the quantity purchased and used is 26,800 units
SP=$5.40 (given)
SQ= 26950(7700@3.50per)
AP=$5.50(given)
AQ=26800 (given)
Total materials variance = SQ*SP-AQ*AP = (26950*$5.40) – (26800*$5.50)
= -$1870 (Unfavourable)
Material Price variance = AQ(SP-AP), or 26800($5.40-$5.50) =-$2680 (Unfavorable)
Material Quantity variance = SP(SQ-AQ), or $5.40(26950-26800) =$810 (Favorable)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.