The standard cost of Product B manufactured by Harrell Company includes 3.5 unit
ID: 2482070 • Letter: T
Question
The standard cost of Product B manufactured by Harrell Company includes 3.5 units of direct materials at $5.4 per unit. During June, 27,300 units of direct materials are purchased at a cost of $5.15 per unit, and 27,300 units of direct materials are used to produce 7,700 units of Product B. Compute the total materials variance and the price and quantity variances. Total materials variance $ Materials price variance $ Materials quantity variance $ Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.50 and the quantity purchased and used is 26,800 units. Total materials variance $ Materials price variance $ Materials quantity variance $Explanation / Answer
a.
Direct Material Price Variance = Actual Quantity x Actual Price - Actual Quantity x Standard Price
= 27,300 * 5.15 - 27,300 * 5.4 = 140595 - 147420 = (6825) Unfavourable
Direct Material Quantity Variance = (Standard Quantity Allowed- actual quantity of direct material used) * Standard Price per unit
= 26,950 - 27300 * 5.4 = (1,890) Unfavourable
Standard Quantity Allowed= Actual Units Produced * Standard Quantity of Direct Material Per Unit
= 7700 * 3.5= 26,950
Total Material Variance = Direct Material Price Variance + Direct Material Quantity Variance
= (6825) + (1,890) = ( 8715) Unfavourable
b.
Direct Material Price Variance = Actual Quantity x Actual Price - Actual Quantity x Standard Price
= 26,800 * 5.50 - 26,800 * 5.4 = 2,680 Favourable
Direct Material Quantity Variance = (Standard Quantity Allowed- actual quantity of direct material used) * Standard Price per unit
= (26,950 - 26,800 ) * 5.4 = 810 Favourable
= Standard Quantity Allowed= Actual Units Produced * Standard Quantity of Direct Material Per Unit
= 7700 * 3.5= 26,950
Total Material Variance = Direct Material Price Variance + Direct Material Quantity Variance
= 2,680 + 810 = 3490 Favourable
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