Question

Exercise 15-5 The standard cost of Product B manufactured by Flint Company includes 3.90 units of direct materials at $5.60 per unit. During June, 26,700 units of direct materials are purchased at a cost of $5.45 per unit, and 26,700 units of direct materials are used to produce 6,800 units of Product B. Compute the total materials variance and the price and quantity variances. Total materials variance Materials price variance Materials quantity variance Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.65 and the quantity purchased and used is 26,800 units. Total materials variance Materials price variance Materials quantity variance

Answer 1

(1)

Standard quantity = 6800 units of Product-B X 3.90 units per Product B => 26520 units
Actual quantity = 26700 units (Given)
Standard Price = $5.60 per unit (Given)
Actual Price = $5.45 per unit (Given)

Material Price Variance = Actual Quantity X (Standard price - Actual Price)
=> 26700 units X ($5.60 - $5.45)
=> 26700 units X $0.15
=> 4005 (Favorable)

Material Quantity Variance = Standard Price X (Standard quantity - Actual Quantity)
=> $5.60 X (26520 units - 26700 units)
=> $5.60 X 180 units
=> 1008 (Unfavorable)

Total Material Variance = Material Price Variance + Material Quantity Variance
=> 4005 (Favorable) + 1008 (Unfavorable)
=> 2997 (Favorable)

(2)

New Actual Price = $5.65 per unit
New Actual Quantity = 26800 units
Standard Price = $5.6 per unit (Same as above)
Standard Quantity = 26520 units (Same as above)

Material Price Variance = Actual Quantity X (Standard price - Actual Price)
=> 26800 units X ($5.60 - $5.65)
=> 26800 units X $0.05
=> 1340 (Unfavorable)

Material Quantity Variance = Standard Price X (Standard quantity - Actual Quantity)
=> $5.60 X (26520 units - 26800 units)
=> 1568 (Unfavorable)

Total Material Variance = Material Price Variance + Material Quantity Variance
=> 1340 (Unfavorable) + 1568 (Unfavorable)
=> 2908 (Unfavorable)