Question

Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (1,100 pounds) has the following standards:

	Standard Quantity		Standard Price
Whole tomatoes	1,800	lbs.	$ 0.53	per lb.
Vinegar	100	gal.	$ 3.20	per gal.
Corn syrup	9	gal.	$ 11.80	per gal.
Salt	40	lbs.	$ 2.90	per lb.

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:

1,900 lbs. of tomatoes

96 gal. of vinegar

10 gal. of corn syrup

39 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	Standard Cost per Batch
Whole tomatoes	$
Vinegar	$
Corn syrup	$
Salt	$
Total	$
Standard unit materials cost per pound	$

b. Determine the direct materials quantity variance for batch K-111. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Ingredient	Materials Quantity Variance	Favorable/Unfavorable
Whole tomatoes	$
Vinegar	$
Corn syrup	$
Salt	$
Total direct materials quantity variance	$

Feedback

Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit).

The direct material cost variance is the difference between the actual and standard material cost.

Remember the process discussed in chapter for calculating standard cost.

Learning Objective 2, Learning Objective 3.

Answer 1

Answers

• [a]

Ingredient	Standard quanity	Standard price	Standard Cost per Batch
Whole tomatoes	1,800	$                                      0.53	$                      954.00
Vinegar	100	$                                      3.20	$                      320.00
Corn syrup	9	$                                    11.80	$                      106.20
Salt	40	$                                      2.90	$                      116.00
Total			$                   1,496.20
Standard unit materials cost per pound			$                         1.36

• [b]

Ingredient	Standard quanity	Actual Quantity	Difference	Standard price	Materials Quantity Variance	Favorable/Unfavorable
Whole tomatoes	1,800	1,900	100	$                                 0.53	$          53.00	Unfavourable
Vinegar	100	96	(4)	$                                 3.20	$         (12.80)	Favourable
Corn syrup	9	10	1	$                               11.80	$          11.80	Unfavourable
Salt	40	39	(1)	$                                 2.90	$           (2.90)	Favourable
Total direct materials quantity variance					$          49.10	Unfavourable