The standard cost of Product B manufactured by Pharrell Company includes 3.7 uni
ID: 2479650 • Letter: T
Question
The standard cost of Product B manufactured by Pharrell Company includes 3.7 units of direct materials at $6.8 per unit. During June, 26,600 units of direct materials are purchased at a cost of $6.70 per unit, and 26,600 units of direct materials are used to produce 7,100 units of Product B.
(a)
Compute the total materials variance
and the price
and quantity variances.
(b)
Compute the total materials variance
and the price
and quantity variances, assuming the purchase price is $6.90 and the quantity purchased and used is 27,000 units.
Total materials variance $Neither favorable nor unfavorableFavorableUnfavorable
Materials price variance $UnfavorableNeither favorable nor unfavorableFavorable
Materials quantity variance $UnfavorableFavorableNeither favorable nor unfavorable
Explanation / Answer
Total material price variance
Total direct materials variance = (SP x SQ) – (AP x AQ)
= (26,720 * 3.7) - ( 26,600 - 3.746)
= 178,636 - 178220
= 416 F as the standard quantity is less than the actual quantity
Material price variance
Direct materials price variance = (SP – AP) x AQ
= ( 6.8 - 6.7) * 26,600
= 2660F
Direct materials quantity variance = SP x (SQ – AQ)
= 6.8 * (26270 - 26600)
= -2244 U as the ctual quantity is more than the standard quantity
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