Standard Product Cost, Direct Materials Variance Condiments Company uses standar

Question

Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,600 pounds) has the following standards:

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-54 were as follows:

a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.

b. Determine the direct materials quantity variance for batch K-54. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Standard Quantity Standard Price Whole tomatoes 4,300 lbs. $ 0.53 per lb. Vinegar 240 gal. 3.20 per gal. Corn syrup 21 gal. 11.80 per gal. Salt 96 lbs. 2.90 per lb.

Explanation / Answer

a) Ingredient Standard Cost per Batch Whole tomatoes                       0.88 ((4300/2600)*$0.53) Vinegar                       0.30 ((240/2600)*$3.2) Corn syrup                       0.10 ((21/2600)*$11.8) Salt                       0.11 ((96/2600)*$2.9) Total                       1.37 Standard unit materials cost per pound $1.37 b) Material quantity variance = Standard price*(standard quantity-actual quantity) Ingredient Materials Quantity Variance Favorable/Unfavorable Whole tomatoes -179 Unfavorable (0.88*(4300-4500)) Vinegar 3 Favorable (0.3(240-230)) Corn syrup -0.1 Unfavorable (0.1*(21-22)) Salt 0.11 (0.11*(96-95)) Favorable Total direct materials quantity variance -175.99 Unfavorable

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