Question

The following materials standards have been established for a particular product:

Standard quantity per unit of output 4.8 pounds
Standard price $12.00 per pound

The following data pertain to operations concerning the product for the last month:

Actual materials purchased 3,700 pounds
Actual cost of materials used in production $43,105
Actual materials used in production 3,000 pounds
Actual output 560 units

What is the materials price variance for the month? (favorable or unfavorable)
What is the materials quantity variance for the month? ( favorable or unfavorable

Answer 1

Answer:

(i) $1,295 Favorable

(ii) $3,744 Unfavorable

Explanation:

Actual price = Actual cost of materials ÷ Actual materials purchased

                    = $43,105 ÷ 3,700

                    = $11.65

Materials price variance = Actual Quantity (Actual Price - Standard Price)

                                         = 3,700($11.65 - $12.00)

                                         = $1,295 Favorable

Standard Quantity = Actual output × Standard quantity per unit of output

                               = 560 × 4.8

                               = 2,688

Materials quantity variance:

= Standard Price (Actual Quantity - Standard Quantity)

= $12.00 (3,000 - 2,688)

= $3,744 Unfavorable