The standard cost card for a product shows that the product should use 4 kilogra

Question

The standard cost card for a product shows that the product should use 4 kilograms of material B per finished unit and that the standard price of material B is $4.50 per kilogram. During April, when the budgeted production level was 1,000 units, 1,040 units were actually made. A total of 4,100 kilograms of material B were used in production and the inventories of material B were reduced by 300 kilograms during April. The total cost of material B purchased during April was $14,400. The material variances for material B during April were:

A. $2,700 F Material Price variance $1,620 F material quantity variance

B. $2,700 F $270 F

C. $4,050 F $270 F

D $4,050 F $1,620 F

Explanation / Answer

The standard cost card for a product shows that the product should use 4 kilograms of material B per finished unit and that the standard price of material B is $4.50 per kilogram. During April, when the budgeted production level was 1,000 units, 1,040 units were actually made. A total of 4,100 kilograms of material B were used in production and the inventories of material B were reduced by 300 kilograms during April. The total cost of material B purchased during April was $14,400. The material variances for material B during April were:

Materials price variance = (Standard Price* Actual Qty purchase - Actual Price)

Materials price variance = (4.50 * 3800 - 14400)

Materials price variance = $ 2700 Favorable

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

Materials quantity variance = (4160-4100)*4.50

Materials quantity variance = $ 270 Favorable

Answer:

B. $2,700 F $270 F

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