Standard Product Cost, Direct Materials Variance Condiments Company uses standar

Question

Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (1,700 pounds) has the following standards:

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-111 were as follows:

a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.

b.  Determine the direct materials quantity variance for batch K-111. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Standard Quantity Standard Price Whole tomatoes 2,800 lbs. $ 0.51 per lb. Vinegar 160 gal. $ 3.10 per gal. Corn syrup 14 gal. $ 11.30 per gal. Salt 64 lbs. $ 2.80 per lb.

Explanation / Answer

(a) Calculation of standard unit material cost per pound for a standard batch

Standard unit material cost per pound = 2,261.4/1,700

= $ 1.33

(b) Material quantity variance = Standard price x ( Standard quantity - Actual quantity )

Ingrediant Standard quantity Standard price Standard cost per batch ($) Whole tomatoes 2,800 lbs. $0.51/ lb 1,428 Vinegar 160 gal. $3.10 / gal. 496 Corn syrup 14 gal. $11.30/ gal. 158.2 Salt 64 lbs. $2.80/ lb. 179.2 Total 2,261.4

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