Exercise 3. The following standards have been established for a raw material use

Question

Exercise 3. The following standards have been established for a raw material used to make product ABC: Standard quantity of the material per unit of output 4.5 pounds per unit Standard price of the material $13.90 per pound The following data pertain to a recent month's operations Actual material purchased and used Actual cost of material purchased and used 26,200 Actual output 2,000 pounds units of product ABC 220 Required: a. What is the materials price variance for the month? b. What is the materials quantity variance for the month?

Explanation / Answer

a Materials price variance=26200-(2000*13.90)= $1600 Favorable b Materials quantity variance=13.90*(2000-220*4.5)= $14039 Unfavorable

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