Question

Majer Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.8	ounces	$	3.00	per ounce	$	20.40
Direct labor		0.6	hours	$	15.00	per hour	$	9.00
Variable overhead		0.6	hours	$	3.00	per hour	$	1.80

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

Originally budgeted output		5,400	units
Actual output		5,000	units
Raw materials used in production		30,500	ounces
Actual direct labor-hours		7,930	hours
Purchases of raw materials		32,900	ounces
Actual price of raw materials	$	62.90	per ounce
Actual direct labor rate	$	72.40	per hour
Actual variable overhead rate	$	4.50	per hour

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 February is:

Answer 1

Materials Quantity Variance = (SQ-AQ) * SP

= (5000*6.8 - 30,500) * 3

= 3500 * 3

= 10,500 FAVOURABLE

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