Question

The standard cost of product 777 includes 2.7 units of direct materials at $5.50 per unit. During August, the company bought 29,200 units of materials at $5.55 and used those materials to produce 11,100 units.

Compute the total, price, and quantity variances for materials.

Total materials variance		$		Unfavorable or Favorable
Materials price variance		$		unfavorable or Favorable
Materials quantity variance		$		unfavorable or Favorable

Answer 1

WORKING NOTES:									Actual output =		11,100 Units
	Standard Cost Per unit				Standard Cost for Actual Output				Actual Cost
	Standard Qunatity	SP	Standard Cost		Standard Qunatity	SP	Standard Cost		Actual Quantity	AP	Actual Cost
	2.7	$               5.50	$                     14.85		29970	$       5.50	$               1,64,835		29200	$         5.55	$               1,62,060
	Units				(11,100 X 2.70 Unit)				Units
SOLUTION : 1
	Material Cost Variance =		Standard Cost	"-"	Actual Cost
	Material Cost Variance =		1,64,835	"-"	1,62,060
	Material Cost Variance =		2,775	Favourable
SOLUTION : 2
	Direct Material price Variance = (		Standard Price	-	Actual Price	) "X"	Actual Quantity
	Direct Material price Variance = (		$                        5.50	-	$                        5.55	) "X"	29200
	Direct Material price Variance =		$                        0.05	"X"	29200
	Direct Material price Variance =		$                     1,460	Unfavorable
SOLUTION : 3
	Material Quantity Variance = (		Actual Quantity	-	Standard Quantity	) "X"	Standard Cost per unit
	Material Quantity Variance = (		29,200	-	29,970	) "X"	$                        5.50
	Material Quantity Variance =		770	"X"	$                        5.50
	Material Quantity Variance =		$                     4,235	Favourable