Asked by Ritvik Rekhi on Jun 13, 2024
Verified
Mcphail Incorporated has a standard cost system. The standards for direct materials for one of its products specify 6.6 grams of a particular input per unit of output at a standard cost of $7.40 per gram. The company has reported the following actual results for the product for September:
Required:
a. Compute the materials price variance for this input for September.
b. Compute the materials quantity variance for this input for September.
Materials Price Variance
The difference between the actual cost of materials purchased and the expected cost based on the standard price.
Materials Quantity Variance
The variance between the actual and projected amounts of materials consumed in manufacturing, multiplied by the unit's standard cost.
Standard Cost
An estimated or pre-determined cost of manufacturing a product, which is used for budgeting and performance evaluation.
- Analyze and interpret materials price and quantity variances.
- Calculate and interpret direct labor rate and efficiency variances.
Verified Answer
= Actual quantity × (Actual price − Standard price)
= 41,900 grams × ($7.80 per gram − $7.40 per gram)
= 41,900 grams × ($0.40 per gram)
= $16,760 Unfavorable
b. Standard quantity = 5,700 units × 6.6 grams per unit = 37,620 grams
Materials quantity variance = (Actual quantity × Standard price) − (Standard quantity × Standard price)
= (Actual quantity − Standard quantity) × Standard price
= (37,630 grams − 37,620 grams) × $7.40 per gram
= 10 grams × $7.40 per gram
= $74 Unfavorable
Learning Objectives
- Analyze and interpret materials price and quantity variances.
- Calculate and interpret direct labor rate and efficiency variances.
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