The following materials standards have been established for a particular product

ID: 2500165 • Letter: T

Question

The following materials standards have been established for a particular product:

Standard quantity per unit of output 3.5 grams

Standard price $12.00 per grams

The following data pertain to operations concerning the product for the last month:

Actual materials purchased 2,300 grams

Actual cost of materials purchased $ 26,795

Actual materials used in production 1,600 grams

Actual output 420 units

The direct materials purchases variance is computed when the materials are purchased.

Part 1: What is the materials price variance for the month? Part 2: Favorable, Unfavorable, or No Effect?

Part 1: What is the materials quantity for the month? Part 2: Favorable, Unfavorable, or No Effect?

MATERIAL PRICE VARIANCE= ACTUAL QUANTITY USED(ACTUAL PRICE - STANDARD PRICE)

ACTUAL QUANTITY USED= 1600 GRAMS

ACTUAL PRICE= $26795 / 2300

=$11.65

MATERIAL PRICE VARIANCE= 1600($11.65 - $12)

=$560 UNFAVOURABLE

MATERIAL QUANTITY VARIANCE=STANDARD COST PER UNIT(ACTUAL USAGE PER UNIT - STANDARD USAGE PER UNIT)

ACTUAL USAGE PER UNIT= 1600 GRAMS / 420 UNITS

=3.81 GRAMS

MATERIAL QUANTITY VARIANCE= $12(3.81 - 3.5)

=$3.72 FAVOURABLE

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