The standard cost of Product B manufactured by Pharrell Company includes 3.2 uni
ID: 2499296 • Letter: T
Question
The standard cost of Product B manufactured by Pharrell Company includes 3.2 units of direct materials at $6.2 per unit. During June, 27,300 units of direct materials are purchased at a cost of $6.05 per unit, and 27,300 units of direct materials are used to produce 8,400 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 $6.25 and the quantity purchased and used is 26,500 units.
Explanation / Answer
(a). Compute the total materials variance and the price and quantity variances.
Let us first see the summary of data given above.
Answer : Material Price Variance = AQ (SP -AP) = 27,300 (6.2 - 6.05) = $ 4,095 (F)
Material Qty. Variance = SP (SQ -AQ) = 6.2 [(8400 x 3.2) -27300]
= 6.2 [ 26,880 - 27300] = $ -2,604(A)
Total Material variance = MPV+MQV = 4095+(-2604) = $1,491 (F)
(b) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $6.25 and the quantity purchased and used is 26,500 units.
Answer : Material Price Variance = 26,500 (SP -AP) = 26,500 (6.2 - 6.25) = $ -1,325 (A)
Material Qty. VAriance = SP (SQ -AQ) = 6.2 [(8400 x 3.2) -26,500]
= 6.2 [ 26,880 - 26,500] = 6.2 x 380 = $ 2,356(F)
Total Material variance = (MPV + MQV) = ( -1325 + 2356) = $1,031 (F)
Notations used: AQ Actual quantity used, SQ = Std. quantity used,
AP= Actual Price per unit, SP = Std. Price per unit.
Summary of material used per unit of Product B Cost($) per unit of DM DM unit used Cost per unit of B Workings if any a b C= a x b Stanadard 6.2 3.2 19.84 Actual 6.05 3.25 19.66 27,300/8,400 for column B.Related Questions
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