Venice Corporation manufactures a variety of liquid lawn fertilizers, including
ID: 2352317 • Letter: V
Question
Venice Corporation manufactures a variety of liquid lawn fertilizers, including a very popular product called Lush 'N Green. Data about Lush 'N Green and Proctol, a major ingredient, follow.Expected operations:
• Proctol is purchased in 55-gallon drums at a cost of $65 per drum. A 2% cash discount is offered by Proctol's manufacturer for prompt payment of invoices, and Venice takes advantage of all discounts offered.
• Shipping fees for Venice amount to $2,660 for every 200 drums of Proctol.
• Each gallon of Lush 'N Green requires a gallon of Proctol.
Actual operations:
• For the period just ended, Venice purchased 1,500 drums of Proctol at a total cost of $118,100, which reflects discounts and shipping. There was no beginning inventory, but an end-of-period inventory revealed that 30 drums were still on hand.
• Manufacturing activity output totaled 82,500 gallons of Lush 'N Green. The standard cost of one drum of Proctol is $77.
Required:
A. Compute the direct-material price variance for Proctol.
B. Compute the direct material quantity variance.
Explanation / Answer
The standard cost of 1,500 drums would be 1,500*77= 115,500. Since they paid 118,100 there would be a 118,100-115,500= $2,600 unfavorable price variance. They used 1,500-30=1,470 drums or 55*1,470= 80,850 gallons. The standard was for them to use 82,500 so they had a favorable quantity of 82,500-80,850= 1,650. The standard per gallon would be $77/55= $1.40/gallon so they would have had a favorable quantity variance of 1,650*1.40= $2,310
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.