Question

Obj. 3 Bellingham Company produces a product that SHOW ME HOW requires 2.5 standard pounds per unit. The standard price is $3.75 per pound. If 15,000 units used 36,000 pounds, which were purchased at $4.00 per pound, what is the direct materials (A) price variance, (B) quantity variance. and (C) cost variance?

Answer 1

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Calculation of Material price and quantity variance = (SP-AP)*AQ - = Material price variance Where SP AP AQ Price variance = = Std. Price per unit Actual. Price per unit Actual Qty. used (3.75-4)*36000 3.75 4 36000 9000 U = = = 11 (SQ-AQ)*SP = Material qty. variance Where SQ AQ SP Qty. variance = Std. qty of materical required for production Actual qty used in production Std. price per unit of material (37500-36000)*3.75 11 11 11 11 37500 Pound 36000 Pound 3.75 5625 F = Material cost variance Material price variance + Material qty. variance 9000U +5635F 3375 = U