Wales Company purchased (at a cost of $11,680) and used 2,000 pounds of material

Question

Wales Company purchased (at a cost of $11,680) and used 2,000 pounds of materials during May. Wales’s standard cost of materials per unit produced is based on 2.70 pounds per unit at a cost $5.90 per pound. Production in May was 680 units.

(a)

Compute the total, price, and quantity variances for materials. (Round answers to 0 decimal places, e.g. 125.)

Total Materials Variance $

Neither favorable nor unfavorableFavorableUnfavorable

Materials Price Variance $

Neither favorable nor unfavorableUnfavorableFavorable

Materials Quantity Variance $

FavorableUnfavorableNeither favorable nor unfavorable

Explanation / Answer

Material Price variance = ( Actual price - standard price ) * actual quantity      = (11680/2000 - 5.90) * 2000      = ( 5.84 - 5.90) * 2000      = 0.06 * 2000      = 120 favourable Material quantity variance = ( standard quantity - actual quantity) * standard price             = ( 680 *2.7 - 2000) * 5.90             = (1836-2000) * 5.90             = 164 * 5.90             = 967.6 unfavourable Total material variance = material price variance + material quantity variance      = 120 favourable + 967.6 unfavourable      = 847.60 unfavourable

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