Acme Company’s production budget for August is 19,500 units and includes the fol

Question

Acme Company’s production budget for August is 19,500 units and includes the following component unit costs: direct materials, $8.00; direct labor, $12.00; variable overhead, $6.00. Budgeted fixed overhead is $52,000. Actual production in August was 21,450 units, actual unit component costs incurred during August include direct materials, $10.20; direct labor, $11.40; variable overhead, $7.20. Actual fixed overhead was $55,500, the standard direct material cost per unit consists of 10 pounds of raw material at $0.8 per pound. During August, 291,720 pounds of raw material were used that were purchased at $0.75 per pound.

Calculate the materials price variance and materials usage variance for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Acme Company’s production budget for August is 19,500 units and includes the following component unit costs: direct materials, $8.00; direct labor, $12.00; variable overhead, $6.00. Budgeted fixed overhead is $52,000. Actual production in August was 21,450 units, actual unit component costs incurred during August include direct materials, $10.20; direct labor, $11.40; variable overhead, $7.20. Actual fixed overhead was $55,500, the standard direct material cost per unit consists of 10 pounds of raw material at $0.8 per pound. During August, 291,720 pounds of raw material were used that were purchased at $0.75 per pound.

Explanation / Answer

Answer:

Material price variance = Actual quantity(Standard price -Actual Price)

= 291,720 pound (0.8 - 0.75) = $14,586 (F)

Material usage variance = Standard Price(Standard quantity -Actual quantity)

= 0.8 (21,450*10 - 291,720) = 61,776 (U)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.