Lakewood Inc. uses a standard cost system. Materials standards are 7 components

Question

Lakewood Inc. uses a standard cost system. Materials standards are 7 components per widget at $9 per component. During August, Lakewood Inc. purchased 65,500 components for $586,200, using the components to produce 8,900 widgets. a. Calculate the direct materials price variance. Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable'. 'Unfavorable or "Nono" for no effect i.e., zero variance). b. Calculate the direct materials quantity variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

Explanation / Answer

a price variance = 586200-(65500*9)= $3300 F b Quantity variance=9*(65500-8900*7)= $28800 U

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