The standard cost of Product B manufactured by MIT Company includes 3.40 units o

Question

The standard cost of Product B manufactured by MIT Company includes 3.40 units of direct materials at $6.30 per unit. During June, 26,600 units of direct materials are purchased at a cost of $6.17 per unit, and 26,600 units of direct materials are used to produce 7,800 units of Product B.

(a)

The standard cost of Product B manufactured by MIT Company includes 3.40 units of direct materials at $6.30 per unit. During June, 26,600 units of direct materials are purchased at a cost of $6.17 per unit, and 26,600 units of direct materials are used to produce 7,800 units of Product B.

Explanation / Answer

Standard Qty for Actual Production= 3.4 x 7,800=26,520 units

Total materials variance = Standard Price x Standard Qty – Actual Price x Actual Qty

                                            =($6.3 x26,520) –($6.17 x 26,600)

                                            =167,076-164,122
                                            =$2,954    F

Materials price variance=( Standard Price- Actual Price) x Actual Qty

                                         =( $ 6.3 - $ 6.17) x 26,600 = $ 0.13 x 26,600 = 3,458        F

Materials quantity variance=( Standard Qty- Actual Qty) x Standard Price

                                                =( 26,520 – 26,600) x 6.3 = - 80 x 6.3 = - $ 504          U

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