Sanford Ltd. produces a product with the following standard cost card: Direct ma

Question

Sanford Ltd. produces a product with the following standard cost card:

Direct materials (19 kg)

$51.54

Direct labour (7 hours)

84.00

Variable overhead (7 hours)

21.00

Fixed overhead (7 hours)

35.00

The fixed overhead rate is based on a standard monthly volume of 16097 units.

The actual results for the month of July 20x5 are as follows:

Direct materials purchased and used (329381 kg)

$620,000

Direct labour (93000 hours)

1,023,000

Variable overhead

320,000

Fixed overhead

580,000

Units produced and sold

15173 units

What is Sanford’s direct materials usage variance for July 20x5 (note: a negative number represents an unfavourable variance and a positive number represents a favourable variance)?

Select one:

a. $111473

b. $-63850

c. $-111473

d. $63850

Direct materials (19 kg)

$51.54

Direct labour (7 hours)

84.00

Variable overhead (7 hours)

21.00

Fixed overhead (7 hours)

35.00

Explanation / Answer

Material usage variance = (Standard quantity-actual quantity)Standard price

                                  = (15173*19-329381)2.71

Material usage variance = -111473

so answer is c) $-111473

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