TB Problem Qu. 10-214 The following standards have been The following standards
ID: 2581162 • Letter: T
Question
TB Problem Qu. 10-214 The following standards have been The following standards have been established for a raw material used to make product 084: Standard quantity of the material per unit of output Standard price of the material 8.5 meters 19.70 per meter The following data pertain to a recent month's operations: Actual material purchased Actual cost of material purchased Actual material used in production Actual output 4,800 meters $ 98,880 4,500 meters 640 units of product 084 The direct materials purchases variance is computed when the materials are purchased. Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? a. Materials price variance b. Materials quantity varianceExplanation / Answer
a) Materials Price Variance = ( Actual Quantity * Actual Price ) - ( Actual Quantity * Standard Price)
= $ 98,880 - ( 4,800 * $ 19.70)
= $ 4,320
Hence the correct answer is $ 4,320
Note : Since the Actual Price is more than the Standard Price to be incurred the variance is Unfavorable.
b. Material Quantity Variance = Standard Price * ( Actual Quantity - Standard Quantity)
= $ 19.70 * ( 4,500 - 5,440)
= $ 18,518
Note :
1. Standard Quantity = Actual Output * Standard Quantity of Material Per Unit of Output
= 640 Units * 8.5
=5,440 Units
2. The Variance is Favorable since the Actual Output used is less than the standard Output.
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