Exercise 25-5 The standard cost of Product B manufactured by Pharrell Company in

Question

Exercise 25-5 The standard cost of Product B manufactured by Pharrell Company includes 2.2 units of direct materials at $5.6 per unit. During June, 26,700 units of direct materials are purchased at a cost of $5.35 per unit, and 26,700 units of direct materials are used to produce 12,000 units of Product B. (a) Compute the total materials variance and the price and quantity variances. Total materials variance $ FavorableUnfavorableNeither favorable nor unfavorable Materials price variance $ FavorableNeither favorable nor unfavorableUnfavorable Materials quantity variance $ UnfavorableFavorableNeither favorable nor unfavorable (b) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.70 and the quantity purchased and used is 26,900 units. Total materials variance $ Neither favorable nor unfavorableUnfavorableFavorable Materials price variance $ Neither favorable nor unfavorableUnfavorableFavorable Materials quantity variance $ UnfavorableNeither favorable nor unfavorableFavorable

Explanation / Answer

a Total materials variance = (26700*5.35)-(12000*2.2*5.6)= 4995 Favorable Materials price variance = 26700*(5.35-5.6)= 6675 Favorable Materials quantity variance = 5.6*(26700-12000*2.2)= 1680 Unfavorable b Total materials variance = (26900*5.7)-(12000*2.2*5.6)= 5490 Unfavorable Materials price variance = 26900*(5.7-5.6)= 2690 Unfavorable Materials quantity variance = 5.6*(26900-12000*2.2)= 2800 Unfavorable

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