NorthShore manufactures a product which should use 3 ounces of chemical XYZ for

Question

NorthShore manufactures a product which should use 3 ounces of chemical XYZ for each unit manufactured, and XYZ is normally purchased for $12 per ounce. During the month, NorthShore used 2,980 ounces of XYZ at a total cost of $34, 270 to produce 1, 000 units of its product. Answer the following: How much is the total materials variance? Is the total materials variance favorable or unfavorable? How much is the materials quantity variance? Is the materials quantity variance favorable or unfavorable? How much is the materials cost variance? Is the materials cost variance favorable or unfavorable? Enter whole numbers for questions 1, 3 and 5. Do not use dollar signs, commas, parentheses, negative signs, etc. Enter favorable or unfavorable for questions 2, 4 and 6. Use all lower case letters.

Explanation / Answer

1.

Calculate the Total direct Material Variance:

= (SP * SQ) – (AP * AQ)

= ($12 * [1,000 units * 3ounce]) – ($11.50 * 2,980 ounce)

= $36,000 - $34,270

= $1,730

2.

Total material variance is $1,730 Favorable.

3.

Calculate the Material Quantity variance:

= SP *(SQ-AQ)

= $12*(3,000 ounce – 2,980 ounce)

= $240.

4.

The Material quantity variance is $240 Favorable.

5.

Calculate the Material Cost variance:

= (SP-AP) *AQ

= ($12-$11.50) * 2,980 ounce

= $1,490

6.

Material cost variance is Favorable.

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