Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of C
ID: 2542121 • Letter: V
Question
Variance Company produces Chemical Y. It budgeted to produce 10,000 gallons of Chemical Y in fiscal year 2006. It actually produced 11,000 gallons. The production process for Chemical Y has two principal ingredients, Mystery Material M and labor. To produce 1 gallon of Chemical Y under budget requires 10 gallons of Mystery Material M @ $3/gallon and .5 labor hours @$20/labor hour. During 2006, it spent $346,500 to purchase 99,000 gallons of Mystery Material M that Variance Company used in production. Its actual total labor costs were $115,000 and it used 5,000 hours of labor.
1. What was the volume variance for mystery material M for the year 2006?
A) $33,000 B) $49,500 C) $30,000 D) $10,000
2. What was the usage variance for mystery material M for the year 2006?
A) $49,500 B) $33,000 C) $16,500 D) $30,000
Please answer and explain why
Explanation / Answer
Answer is A
volume variance for mystery material M
( Budgeted unit quantity consumed-Actual unit quantity consumed ) x Budgeted cost per unit
(110000-99000)*3
33000
actual quantity consumed
99000
budgetd material consumed at actual level of activity
11000*10
110000
budgeted cost per material
3
Answer is B
Material usuage variance
standard price*(standard quantity at actual output-actual quantity)
3*(110000-99000)
33000
standard price
3
actual quantity consumed
99000
budgetd material consumed at actual level of activity
11000*10
110000
Answer is A
volume variance for mystery material M
( Budgeted unit quantity consumed-Actual unit quantity consumed ) x Budgeted cost per unit
(110000-99000)*3
33000
actual quantity consumed
99000
budgetd material consumed at actual level of activity
11000*10
110000
budgeted cost per material
3
Answer is B
Material usuage variance
standard price*(standard quantity at actual output-actual quantity)
3*(110000-99000)
33000
standard price
3
actual quantity consumed
99000
budgetd material consumed at actual level of activity
11000*10
110000
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