Question

Flower City Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 31 pounds. The company uses a standard cost of $2.20 per pound of clay. Flower City produced 2,500 planters in May. In that month, 80,000 pounds of clay were purchased and used at the total cost of $168,000 Read the requirements. Requirement 1. Calculate the direct material price variance. Begin by determining the formula for the price variance, then compute the price variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM Direct materials) DM price variance x (

Answer 1

Standard Costing is a costing method in which first the cost are allocated based on the predetermined rates and then these are compared with the actual cost incurred determine the reasons for variance both favorable and unfavorable variance. Material Price Variance The difference between Standard price and Actual price per unit of material applied the actual quantity of material purchased or used. If negative then unfavorable and positive then favorable. Material Quantity Variance The difference between standard quantity ought have been used and the actual quantity used, valued at standard price. If negative then unfavorable and positive then favorable. $1680000/80000 $2.10 Actual cost per pound Ans 1 [Actual quantity x (Standard Price Actual Price) DM Price variance 80000 x($2.20- | $2.10 ) $8,00o0 |(F) [Standard Rate x (Standard Quantity - Actual Quantity)] Dm Quantity variance Ans 2 Standard quantity 2500 x 31 pound- 77500 80000($5,500) (U) $2.20 x77500-