The standard cost of Product B manufactured by MIT Company includes 3.80 units o

Question

The standard cost of Product B manufactured by MIT Company includes 3.80 units of direct materials at $6.30 per unit. During June, 26,700 units of direct materials are purchased at a cost of $6.16 per unit, and 26,700 units of direct materials are used to produce 6,900 units of Product B.

LINK TO TEXT

The standard cost of Product B manufactured by MIT Company includes 3.80 units of direct materials at $6.30 per unit. During June, 26,700 units of direct materials are purchased at a cost of $6.16 per unit, and 26,700 units of direct materials are used to produce 6,900 units of Product B.

Explanation / Answer

Total materials variance = Standard cost for actual output - Actual cost = (3.80 x 6,900 x $ 6.30) - (26,700 x $ 6.16) = $ 714 Favorable

Materials price variance = ( Standard price per unit - Actual price per unit) x Actual quantity purchased = ( $ 6.30 - $ 6.16) x 26,700 = $ 3,738 Favorable

Materials quantity variance = ( Standard quantity for actual output - Actual quantity used ) x Standard price per unit

= ( 26,220 - 26,700) x $ 6.30 = $ 3,024 Unfavorable

If the purchase price per unit = $ 6.39 and actual quantity of materials used is 26,800 units:

Total materials variance = ( 3.8 x 6,900 x $ 6.30) - ( 26,800 x $ 6.39) = $ 6,066 Unfavorable

Materials price variance = ( $ 6.30 - $ 6.39 ) x 26,800 = $ 2,412 Unfavorable

Materials quantity variance = ( 26,220 - 26,800) x $ 6.30 = $ 3,654 Unfavorable

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