The standard cost of Product B manufactured by MIT Company includes 3.10 units o
ID: 2462959 • Letter: T
Question
The standard cost of Product B manufactured by MIT Company includes 3.10 units of direct materials at $5.90 per unit. During June, 27,000 units of direct materials are purchased at a cost of $5.79 per unit, and 27,000 units of direct materials are used to produce 8,600 units of Product B.
1) Compute the total materials variance and the price and quantity variances.
2) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.96 and the quantity purchased and used is 27,000 units.
Total materials variance $ Materials price variance $ Materials quantity variance $Explanation / Answer
1. Total materials variance: Standard cost for actual output - Actual cost = 8,600 x 3.10 x 5.90 - 27,000 x 5.79 =
$ 964 F
Materials price variance = ( Standard price per unit - Actual price per unit) x Actual quantity purchased= ( 5.90 - 5.79) x 27,000 = $ 2,970 F
Materials quantity variance = ( Standard quantity for actual output - Actual quantity used ) x Standard price per unit
= ( 3.10 x 8,600 - 27,000) x 5.90 = $ 2,006 U
2. If the purchase price is $ 5.96 per unit,
Total materials variance = 8,600 x 3.10 x 5.90 - 27,000 x 5.96 = $ 3,626 U
Material price variance = ( 5.90 - 5.96) x 27,000 = $ 1,620 U
Material quantity variance remains unchanged at $ 2,006 U
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