34) Gipple Corporation makes a product that uses a material with the quantity st

Question

34) Gipple Corporation makes a product that uses a material with the quantity standard of 7.3 grams per unit of output and the price standard am. In January the company produced 3,400 units using 24,870 grams of the direct material. During the month the of S6.00 per gr company purchased 27,400 grams of the direct material at $6.10 per gram. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for January is: A) $305 F B) S300 F C) S300 U D) S305 U

Explanation / Answer

Solution

Given information

Standard Quantity (SQ) = 7.3 grams per unit

Standard Price (SP) = $ 6 per gram

Actual Production = 3,400 units

Material used or Actual Quantity (AQ) = 24,870 grams

Material purchased = 27,400 grams

Actual Price (AP) = $ 6.10 per gram

Formula used:

Material Quantity Variance = Standard Price (Standard Quantity - Actual Quantity)

                                                  = $ 6 (24,820 grams* – 24,870 grams)

                                                 = $ 6 (-50 grams)

                                                 = $ - 300

= $ 300 (Unfavourable)      Answer

*Standard quantity of material is given for 1 unit, as actual production is 3400 units, standard quantity will be calculated for 3400 units produced.

Standard quantity of material for 1 unit is 7.3 grams

Standard quantity of material for 3400 units will be: 3400 X 7.3 = 24,820 grams

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