Pardoe, Inc., manufactures a single product in which variable manufacturing over

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: Direct materials Direct labor Variable manufacturing overhead Standard Quantity 2.5 pounds 0.6 hours 0.6 hours Standard Price or Rate $3.50 per pound $8 per hour $1.75 per hour Standard Cost $8.75 $4.8 $1.05 During March, the following activity was recorded by the company The company produced 3,400 units during the month. A total of 12,000 pounds of material were purchased at a cost of $33,600. . There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,400 pounds of material remained in the warehouse During March, 2,240 direct labor-hours were worked at a rate of $8.50 per hour. Variable manufacturing overhead costs during March totaled $2,552 The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for March is:

Explanation / Answer

Materials quantity variance = Standard rate*(Actual quantity-Standard quantity) =3.5*(9600-3400*2.5)= 3850 Unfavorable

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