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 (900 pounds) has the following standards: Standard Price $0.46 per lb $ 2.80 per gal 10.20 per gal $ 2.60 per lb Standard Quantity Whole tomatoes Vinegar Corn syrup Salt 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- 111 were as follows 1,600 lbs. of tomatoes 77 gal. of vinegar 8 gal. of corn syrup 31 lbs. of salt a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent. Ingredient Whole tomatoes Vinegar Corn syrup 1,500 lbs 80 gal 32 lbs Standard Cost per Batch

Explanation / Answer

a) Ingredient Standard quantity Standard price Standard cost per Batch Whole Tomatoes 1500 0.46 690 Vinegar 80 2.8 224 Corn syrup 7 10.2 71.4 Salt 32 2.6 83.2 b) Ingredient Actual quantity Standard quantity Difference Standard price Material quantity variance Favourable / Unfavourable Whole Tomatoes 1600 1500 -100 0.46 -46 Unfavourable Vinegar 77 80 3 2.8 8.4 Favourable Corn syrup 8 7 -1 10.2 -10.2 Unfavourable Salt 31 32 1 2.6 2.6 Favourable

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