Question

Apex Surgery Center performs knee and joint surgeries Monday through Saturday throughout the year. Apex Surgery Center has the following material costs for two items used in its operating room. Standard costs for one surgery include Item A: 5 pieces at $50 each Item B: 10 pieces at $75 each During September the following data apply to the Center Surgeries completed = 1,500 Item A purchased and used: 8,000 pieces at $40 per piece Item B purchased and used: 14,000 pieces at $76 per piece Compute Materials price and efficiency variances for Item A. Compute Materials price and efficiency variances for Item B.

Answer 1

1) Material price variance for Product A: (Actual Quantity Purchased * Actual Unit Cost) - (Actual Quantity Purchased * Standard Unit Cost)

= 320,000 - 400,000 = 80,000 Favorable

　

Efficiency variance for Product A: (Actual unit usage - Standard unit usage) * Standard cost per unit

= (8000-7500) * 50 = 25,000 Unfavorable

　

Material price variance for Product B: (Actual Quantity Purchased * Actual Unit Cost) - (Actual Quantity Purchased * Standard Unit Cost)

= 1,064,000 - 1,050,000 = 14,000 Unfavorable

　

Efficiency variance for Product B: (Actual unit usage - Standard unit usage) * Standard cost per unit

= (14,000 - 15,000) * 75 = 75,000 Favorable

　

Working:

	Units	Actual cost Per unit	Total cost
A	8000	40	320,000
B	14000	76	1,064,000
			1,384,000

	Units	Standard cost Per unit	Total cost
A	8000	50	400,000
B	14000	75	1,050,000
			1,450,000

	Actual units	Standard units	Standard cost Per unit
A	8000	7500	50
B	14000	15000	75