Question

Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		5.6	ounces	$	7.00	per ounce	$	39.20
Direct labor		0.7	hours	$	10.00	per hour	$	7.00
Variable overhead		0.7	hours	$	7.00	per hour	$	4.90

The company reported the following results concerning this product in June.

Originally budgeted output		4,000	units
Actual output		4,000	units
Raw materials used in production		23,000	ounces
Purchases of raw materials		20,500	ounces
Actual direct labor-hours		5,500	hours
Actual cost of raw materials purchases	$	42,500
Actual direct labor cost	$	14,000
Actual variable overhead cost	$	4,000

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials quantity variance for June is:

Answer 1

Standard materials allowed = 4,000 units*5.6 ounces Standard materials allowed = 22,400 ounces Materials quantity variance = (Actual qunatity used - Standard quantity allowed)*Standard price Materials quantity variance = (23,000 - 22,400) *$7 Materials quantity variance = $4,200 Unfavorable As the actual qunatity used for production is more than the standard quantity allowed, it leads to an unfavorable qunatity variance.