The standard cost card for one unit of a certain finished product shows the foll

Question

The standard cost card for one unit of a certain finished product shows the following: Standard Quantity or Hours Standard Price or Rate Direct materials 10 pounds ? per pound Direct labor 3.0 hours $16 per hour Variable manufacturing overhead 4.0 hours $10 per hour The total standard variable cost for one unit of finished product is $90 and the company produces 600 units of finished product in June. Additional information regarding direct materials in June include the following: Actual quantity purchased 5,400 pounds Actual quantity used in production 5,000 pounds What is the materials quantity variance for the month?

Explanation / Answer

Answer

Total standard variable cost for one unit of finished product = $ 90 (given)

So,

standard Direct materials cost for one unit  + standard Direct laborcost for one unit +standard  Variable manufacturing overhead cost for one unit = 90

standard Direct materials cost for one unit + 3*16 + 4*10 = 90

standard Direct materials cost for one unit = 90 - 3*16 -4*10

standard Direct materials cost for one unit = $ 2 per unit

Standard Price or Rate = standard Direct materials cost for one unit /Standard Quantity

Standard Price or Rate = 2/10

Standard Price or Rate = $ 0.20 per pound

Materials usage/quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price

Materials usage/quantity variance = (5000 - 600*10)*0.20

Materials quantity variance for the month = $ 200 Favorable

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