The standard cost of product 777 includes 2 units of direct materials at $6 per

Question

The standard cost of product 777 includes 2 units of direct materials at $6 per unit. During August, the company bought 29,000 units of materials at $6.3 and used those materials to produce 16,000 units.

Compute the total, price, and quantity variances for materials.

Total materials variance $ Neither favorable nor unfavorableFavorableUnfavorable Materials price variance $ UnfavorableFavorableNeither favorable nor unfavorable Materials quantity variance $ FavorableNeither favorable nor unfavorableUnfavorable

Explanation / Answer

Total material variance = AQ*AR - SQ*SR

                                         = 29000 * 6.3 -    (16000*2) * 6

                                          = 182,700 - 192,000

                                          =- 9300 (F)

Material price variance = AQ*AP -   AQ*SP

                                           = (29000 *6.3) - (29000 * 6)

                                           = 182,700 - 174,000

                                      = 8700 (U)

MAterial quantity variance =   SR *AQ - SR *SQ

                                              = 6 *29000 -     6 *(16000*2)

                                             = 174000- 192000

                                             = -18000 (F)

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