Question

The standard cost of product manufactured by Pharrell Company includes 2.0 units of direct materials at $6.90 per unit. During June, 27,500 units of direct materials are purchased at a cost of $6.85 per unit, and 27,500 units of direct materials are used to produce 13,700 units of Products Compute the total materials variance and the price and quantity variances. Total materiais variance Materials price variance Materials quantity variance (b) Compute the total materiais variance and the price and quantity variances, assuming the purchase price is $6.95 and the quantity purchased and used is 26,500 units Total materials variance Materials price variance Materials quantity variance

Answer 1

(a)
Standard quantity of materials for actual production = Standard quantity per unit * Actual production = 2 * 13700	27400
Total materials variance = ( Actual quantity * Actual price ) - ( Standard quantity * Standard price ) = ( 27500 * 6.85 ) - ( 27400 * 6.90 )	685	Favorable
Material price variance = ( Actual price - Standard price ) * Actual quantity = ( 6.85 - 6.90 ) * 27500	1375	Favorable
Materials quantity variance = ( Actual quantity - Standard quantity ) * Standard rate = ( 27500 - 27400 ) * 6.90	690	Unfavorable

(b)
Total materials variance = ( Actual quantity * Actual price ) - ( Standard quantity * Standard price ) = ( 26500 * 6.95 ) - ( 27400 * 6.90 )	-4885	Favorable
Material price variance = ( Actual price - Standard price ) * Actual quantity = ( 6.95 - 6.90 ) * 26500	1325	Unfavorable
Materials quantity variance = ( Actual quantity - Standard quantity ) * Standard rate = ( 26500 - 27400 ) * 6.90	-6210	Favorable