Do It! Review 15-2 The standard cost of product 777 includes 2.70 units of direc

Question

Do It! Review 15-2

The standard cost of product 777 includes 2.70 units of direct materials at $5.60 per unit. During August, the company bought 29,100 units of materials at $5.65 and used those materials to produce 11,100 units.

Compute the total, price, and quantity variances for materials.
Total materials variance $ FavorableUnfavorableNeither favorable nor unfavorable Materials price variance $ Neither favorable nor unfavorableFavorableUnfavorable Materials quantity variance $ UnfavorableNeither favorable nor unfavorableFavorable

Explanation / Answer

note: standard quantity for 11,100 units wiil be => 11,100 units * 2.70 =>29,970 units

note:

total material variance is favourable since (actual price * actual quantity ) is less than (standard price * standard quantity)

material price variance is unfavourabel since actual price is greater than standard price.

materials quanitity variance is favourable since actual quanitity is less than standard quantity.

Total materials variance (actual price * actual quantity ) - (standard price * standard quantity) => ($5.65 * 29,100) - ($5.60* 29,970) =>$164,415 - $167,832 $3,417 Favourable Material price variance => [actual quantity* (actual price - standard price)]=>[29,100*[5.65 - 5.60)] $1,455 unfavourable materials quantity variance =>[ standard price *(actual quantity - standard quantity)]=>[$5.60* (29,100-29,970] $4,872 favourable

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