Castel, Inc., manufactures a single product. The company uses a standard cost sy

Question

Castel, Inc., manufactures a single product. The company uses a standard cost system and has established the following standards for one unit of product:

Standard

Quantity of inputs

Standard Price

or Rate per input

Standard

Cost per unit

1.5 pounds

$3.00 per pound

$4.50

0.6 hours

$6.00 per hour

$3.60

Castel's budget for March used estimated production and sales of 2,800 units.

During March, the following activity was recorded by the company:

The company produced 3,000 units during the month.

A total of 8,000 pounds of material were purchased and used. The cost was $23,000.

During March, 1600 direct labor hours were worked at a rate of $6.50 per hour.

For all of these Castel questions, pick the closest answer numerically and then choose based on the U or F.

The materials quantity (or usage) variance for March is:

$6,000 F

$10,500 U

$11,400 U

$11,400 F

$10,500 F

$6,000 U

Standard

Quantity of inputs

Standard Price

or Rate per input

Standard

Cost per unit

Direct materials

1.5 pounds

$3.00 per pound

$4.50

Direct labor

0.6 hours

$6.00 per hour

$3.60

Explanation / Answer

b.$10,500 U.

direct material usage variance = standard price * (actual quantity - standard quantity)

here,

standard price = $3.00

acutal quantity = 8,000 pounds

standard quanity = 3,000 units*1.5 pounds

=>4,500 pounds

now

material usage variance

=>$3.00*(8,000-4,500)

=>$10,500 U...............(unfavorable since actual usage is more than standard usage).

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