The standard cost of Product B manufactured by MIT Company includes 3.00 units o

Question

The standard cost of Product B manufactured by MIT Company includes 3.00 units of direct materials at $5.70 per unit. During June, 27,300 units of direct materials are purchased at a cost of $5.54 per unit, and 27,300 units of direct materials are used to produce 9,000 units of Product B.

Compute the total materials variance and the price and quantity variances.

Total Material Valence $

Materials Price Valence $

Material Qunity Valence $

Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.81 and the quantity purchased and used is 26,800 units.

Total Material Valence $

Materials Price Valence $

Material Qunity Valence $

Explanation / Answer

SQ=27000 (9000@3per)

AP=$5.54(given)

AQ=27300 (given)

Now, price variance is AQ(SP-AP), or 27300($.16)=$4368 (This is favorable, since the materials were obtained at below average cost.)

Quantity variance is SP(SQ-AQ), or $5.70(-300)=-$1710. (This is unfavorable, since more than the standard quantity was used.)

Total materials variance can be obtained two ways: SQ*SP-AQ*AP, or totaling the two variances already calculated. SQ*SP-AQ*AP=153900-151242=$2658

2.

SP=$5.70(given)

SQ=27000 (9000@3per)

AP=$5.81(given)

AQ=26800 (given)

Now, price variance: SQ(SP-AP)=27000(5.7-5.81)=-2970

Quantity variance: SP(SQ-AQ)=5.70(27000-26800)=1140

Thus total variance: -1830. (Note that negative numbers are unfavorable, positive numbers are favorable.)

SQ=27000 (9000@3per)

AP=$5.54(given)

AQ=27300 (given)

Now, price variance is AQ(SP-AP), or 27300($.16)=$4368 (This is favorable, since the materials were obtained at below average cost.)

Quantity variance is SP(SQ-AQ), or $5.70(-300)=-$1710. (This is unfavorable, since more than the standard quantity was used.)

Total materials variance can be obtained two ways: SQ*SP-AQ*AP, or totaling the two variances already calculated. SQ*SP-AQ*AP=153900-151242=$2658

2.

SP=$5.70(given)

SQ=27000 (9000@3per)

AP=$5.81(given)

AQ=26800 (given)

Now, price variance: SQ(SP-AP)=27000(5.7-5.81)=-2970

Quantity variance: SP(SQ-AQ)=5.70(27000-26800)=1140

Thus total variance: -1830. (Note that negative numbers are unfavorable, positive numbers are favorable.)

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