The standard cost of Product B manufactured by MIT Company includes 2.90 units o
ID: 2486494 • Letter: T
Question
The standard cost of Product B manufactured by MIT Company includes 2.90 units of direct materials at $5.90 per unit. During June, 27,100 units of direct materials are purchased at a cost of $5.73 per unit, and 27,100 units of direct materials are used to produce 9,200 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 $6.04 and the quantity purchased and used is 26,900 units.
Total materials variance $
Materials price variance $
Materials quantity variance $
Explanation / Answer
a)
Direct material price variance = (Standard price – Actual price)*Actual quantity
= ($5.90 - $5.73)*27,100 units
= $0.17*27,100 units
= $4,607 Favorable
Direct material quantity variance = (Standard quantity – Actual quantity)*Standard price
= [(2.9 * 9,200 units of product B) – 27,100]*$5.90
= (26,680 – 27,100)*$5.90
= 420 * $5.90
= $2,478 unfavorable
Total material variance = Material price variance + Material quantity variance
= $4,607 F + (-$2,478 U)
= $2,129 Favorable
b)
Direct material price variance = (Standard price – Actual price)*Actual quantity
= ($5.90 - $6.04)*26,900 units
= $0.14*26,900 units
= $3,766 Unfavorable
Direct material quantity variance = (Standard quantity – Actual quantity)*Standard price
= [(2.9 * 9,200 units of product B) – 26,900]*$5.90
= (26,680 – 26,900)*$5.90
= 220*$5.90
= $1,298 Unfavorable
Total material variance = Material price variance + Material quantity variance
= $3,766 + $1,298
= $5,064
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