Question

Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The materials standard for each batch of cereal produced is 14 pounds of pickles at a standard cost of $3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What is Magno's materials quantity variance for August? 

Multiple Choice 

$19,500 Unfavorable 

$18,000 Favorable 

$1,500 Unfavorable 

Answer 1

Option (b) is correct

Material quantity variance is given by:

Material quantity variance = (Standard quantity for actual units - Actual quantity) * Standard price

Standard price = $3 per pound

Actual units (batches) = 60000, Standard quantity = 1.4 pound per batch

Standard quantity for actual units = 60000 * 1.4 = 84000

Actual quantity = 78000 pounds

Now, putting these values in the above formula, we get,

Material quantity variance = (84000 - 78000) * $3

Material quantity variance = 6000 * $3 = $18000

Since the variance is positive, so it is a favorable variance.