Asked by kevin britton on May 18, 2024
Verified
Doogan Corporation makes a product with the following standard costs: The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 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 January is:
A) $1,411 Favorable
B) $1,660 Favorable
C) $1,660 Unfavorable
D) $1,411 Unfavorable
Direct Materials
Raw materials that are directly traceable to the manufacturing of a specific product.
Direct Labor-Hours
The total hours of work directly involved in manufacturing goods or providing a service.
Variable Overhead
The costs that fluctuate with the level of production output and may include expenses such as utilities and indirect materials.
- Compute and examine variances in direct material costs, encompassing both price and quantity discrepancies.
Verified Answer
Standard quantity = (5,200 units x 7.6 grams per unit) = 39,520 grams
Standard price = $1.60 per gram
Actual quantity = 44,400 grams
Actual cost = $1.70 per gram
Materials quantity variance = (39,520 - 44,400) x $1.60 = $7,872 Unfavorable
Therefore, the answer is C) $1,660 Unfavorable, because the question is asking specifically for the materials quantity variance, not the total materials variance.
Learning Objectives
- Compute and examine variances in direct material costs, encompassing both price and quantity discrepancies.
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