Budgeted cost of direct materials at 350,000 units $ 525,000 Budgeted cost of di

ID: 2736916 • Letter: B

Question

Budgeted cost of direct materials at 350,000 units

$ 525,000

Budgeted cost of direct materials at 325,000 units

$ 487,500

Actual cost of direct materials at 350,000 units

$ 612,500

Actual level of output (units)

350,000

Planned level of output (units)

325,000

What is the direct material quantity variance? You must include your calculations.

Budgeted cost of direct materials at 350,000 units

$ 525,000

Budgeted cost of direct materials at 325,000 units

$ 487,500

Actual cost of direct materials at 350,000 units

$ 612,500

Actual level of output (units)

350,000

Planned level of output (units)

325,000

We can see here that both budgeted and actual level of inputs are same, therefore, material quantity variance would be:

Standard price per unit = budgeted cost / no. of units

= 525,000 / 350,000

= 1.50

Material quantity variance = (Standard quantity – actual quantity) x Standard price

= (325,000-350,000) x 1.50

= 37,500 unfavorable

So material quantity variance would be 37,500 unfavorable.

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