The standard cost of Product B manufactured by Pharrell Company includes 2.0 uni
ID: 2473077 • Letter: T
Question
The standard cost of Product B manufactured by Pharrell Company includes 2.0 units of direct materials at $6.9 per unit. During June, 27,500 units of direct materials are purchased at a cost of $6.85 per unit, and 27,500 units of direct materials are used to produce 13,700 units of Product B. (a) Compute the total materials variance and the price and quantity variances. Total materials variance $ Materials price variance $ Materials quantity variance $ (b) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $6.95 and the quantity purchased and used is 26,500 units. Total materials variance $ Materials price variance $ Materials quantity variance
Explanation / Answer
1)
actual quantity = 2 * 13700 = 27400
Total cost variance = Actual cost - standard cost
= 27400 * 6.85 - 27500 * 6.90
= 2060 favorable
Price variance = (AP - SP) * actual quantity
= (6.85 - 6.90) * 27400
= 1370 favorable
Quanity variance = (AH - SH)* standard price
= (27400 - 27500) * 6.90
= 690 favorable
2)
Total cost variance = Actual cost - standard cost
= 26500 * 6.95 - 27500 * 6.90
= 5575 favorable
Price variance = (AP - SP) * actual quantity
= (6.95 - 6.90) * 26500
= 1325 Unfavorable
Quanity variance = (AH - SH)* standard price
= (26500 - 27500) * 6.90
= 6900 favorable
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