The standard cost of Product B manufactured by MIT Company includes 2.00 units o
ID: 2453696 • Letter: T
Question
The standard cost of Product B manufactured by MIT Company includes 2.00 units of direct materials at $5.50 per unit. During June, 27,100 units of direct materials are purchased at a cost of $5.27 per unit, and 27,100 units of direct materials are used to produce 13,400 units of Product B.
(a) Compute the total materials variance and the price and quantity variances.
Total materials variance $_________ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Materials price variance $_________ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Materials quantity variance $_________ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
(b) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.65 and the quantity purchased and used is 26,500 units.
Total materials variance $_________ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Materials price variance $_________ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Materials quantity variance $_________ Favorable, Unfavorable, or Neither Favorable or Unfavorable?
Explanation / Answer
a) Material Price Variance:-
= Actual quantity purchased (Standard price - Actual price)
= 27100 ( 5.50 - 5.27)
= 6233 (F) [ (F) represents Favourable]
Material Quantity Variance:- Standard Price ( Standard quantity for actual output - Actual quantity used)
= 5.50 ( 26800* - 27100)
= 1650(A) [ (A) represents Unfavourable]
* Standard quantity for actual output = 13400 * 2 = 26800
Total Material variance = Standard cost for actual output - Actual cost
= 147400 - 142817 = 4583 (F) [ (F) represents Favourable]
Standard cost for actual output= (2 * 5.50 * 13400) = 147400
Actual Cost = 27100 * 5.27 = 142817
Conclusion:- (a)
(F) Denotes Favourable & (A) Denotes Unfavourable.
(b) Material Price Variance
= Actual quantity purchased (Standard price - Actual price)
= 26500 ( 5.50 - 5.65)
= 3975 (A) [ (A) represents Unfavourable]
Note:- Actual purchase price is $5.65 and the quantity purchased and used is 26,500 units. (Part b)
Material Quantity Variance
= Standard Price ( Standard quantity for actual output - Actual quantity used)
= 5.50 ( 26800* - 26500)
= 1650(F) [ (F) represents Favourable]
* Standard quantity for actual output = 13400 * 2 = 26800
Note :- Actual quantity purchased and used is 26,500 units. (Part b)
Total Material variance = Standard cost for actual output - Actual cost
= 147400 - 149725= 2325 (A) [ (A) represents Unfavourable]
Standard cost for actual output= (2 * 5.50 * 13400) = 147400
Actual Cost = 26500 * 5.65 = 149725
Note:- Actual purchase price is $5.65 and the quantity purchased and used is 26,500 units. (Part b)
Conclusion:- (b)
(A) denotes Unfavourable and (F) denotes Favourable.
Material cost variance / Total Material variance 4583 (F) [ 6233 - 1650 ] Matrial price variance 6233 (F) Material quantity variance 1650 (A)Related Questions
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