2 MacKenzie Company uses a standard costing system. Their standard cost card for

Question

2 MacKenzie Company uses a standard costing system. Their standard cost card for one unit of a product shows the following Direct materials Direct labor Variable manufacturing overhead Standard Quantity or Hours Standard Price or Rate ? per pound $16 per hour $10 per hour 10 pounds 3.0 hours 3.0 hours The total standard variable cost for one unit of finished product is $120 and the company produces 600 units of finished product in June Additional information regarding direct materials in June include the following 5,400 pounds 5,200 pounds Actual quantity purchased: Actual quantity used in production What is the materials quantity variance for the month? A. S B. $ C. $ D. S E. None of the above 3,360 Favorable 8,400 Favorable 2,520 Favorable 840 Favorable

Explanation / Answer

C. $ 2,520 Favorable

Workings:

Step-1:Calculate standard price of direct material per unit Total standard variable cost $        120 Less: Direct Labor 3*16 = $          48 Variable manufacturing overhead 3*10 = $          30 Direct Material costs $          42 Direct Materials quantity(Standard) 10 Standard cost of Direct Materials $       4.20 Step-2:Calculate material quantity variance Material Quantity Variance = (Standard Quantity-Actual Quantity)*Standard price per unit = (6000-5400)*$4.20 = $       2,520 Favorable Working: Standard quantity of Materials = Actual Units produced x Standard quantity of Material per unit of output = 600 x 10 = 6,000

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