Munoz Fruit Drink Company planned to make 205,000 containers of apple juice. It

Question

Munoz Fruit Drink Company planned to make 205,000 containers of apple juice. It expected to use two cups of frozen apple concentrate to make each container of juice, thus using 410,000 cups of frozen concentrate. The standard price of one cup of apple concentrate is $0.22. Munoz actually paid $121,272 to purchase 418,180 cups of concentrate, which was used to make 206,000 containers of apple juice.

Required:

Compute the actual price per cup of concentrate. (Round your answer to 2 decimal places.)

Compute the standard quantity (number of cups of concentrate) required to produce the containers.

Compute the materials price variance and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance). Round "Price variance" to 2 decimal places.)

Compute the materials usage variance and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance). Round "Usage variance" to 2 decimal places.)

Explanation / Answer

a) Compute the actual price per cup of concentrate.

Actual price per concentrate = 121272/418180 = 0.29 per cup

b) Compute the standard quantity (number of cups of concentrate) required to produce the containers.

Standard quantity required to produce the containers = 206000*2 = 412000

c) Material price variance = (standard price-actual price)actual quantity

                                      = (0.22*418180-121272)

Material price variance = 29272.40 U

d) mateiral usage variance = (standard quantity-actual quantity)standard price

                                       = (412000-418180)0.22

Material usage variance = 1359.60 U

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