Question

The standard cost of Product B manufactured by Pharrell Company includes 3 units of direct materials at $5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70 per unit, and 29,000 units of direct materials are used to produce 9,400 units of Product B. (a) Compute the total materials variance and the price and quantity variances. Total materials variance -6200 Favorable Materials price variance 8700 Favorable Materials quantity variance -2500 Unfavorable (b) Compute the total materials variance and the price and quantity variances, assuming the purchase price is $5.15 and the quantity purchased and used is 28,000 units. Total materials variance -1700 Unfavorable Materials price variance Unfavorable 4200 i -2500 Materials quantity variance $ Favorable

Answer 1

Part a
	Standard Price per pound =$5.00
	Standard quantity =9400 units*3 =28,200 pounds
	Actual Price per pound =$4.70
	Actual quantity =29,000 pounds
	Material Price variance = (Standard price - Actual Price)*Actual quantity
	Material Price variance = ($5.00 - $4.70)*29,000 =$8,700(F)
	Material quantity variance = Standard price(Standard Quantity - Actual Quantity)
	Material quantity variance = $5(28,200 pounds - 29,000 pounds) =$4,000(U)
	Material cost variance =(Standard price*Standard quanity) - (Actual price*Actual quantity)
	Material cost variance =($5*28,200 pounds) - ($4.70*29,000 pounds)
	Material cost variance =$141,000 - $136,300 =$4,700(F)
Part b
	Standard Price per pound =$5.00
	Standard quantity =9400 units*3 =28,200 pounds
	Actual Price per pound =$5.15
	Actual quantity =28,000 pounds
	Material Price variance = (Standard price - Actual Price)*Actual quantity
	Material Price variance = ($5.00 - $5.15)*28,000 =$4,200(U)
	Material quantity variance = Standard price(Standard Quantity - Actual Quantity)
	Material quantity variance = $5(28,200 pounds - 28,000 pounds) =$1,000(F)
	Material cost variance =(Standard price*Standard quanity) - (Actual price*Actual quantity)
	Material cost variance =($5*28,200 pounds) - ($5.15*28,000 pounds)
	Material cost variance =$141,000 - $144,200 =$3,200(U)