Asked by Iqbal Qayum on Apr 29, 2024
Verified
The following standards have been established for a raw material used to make product O84:
The following data pertain to a recent month's operations:
The direct materials purchases variance is computed when the materials are purchased.Required:a. What is the materials price variance for the month?b. What is the materials quantity variance for the month?
Materials Price Variance
The difference between the actual cost of materials used in production and the expected (or standard) cost, which can indicate changes in market prices or issues with budgeting.
Raw Material
Basic materials that are used in the production process to manufacture goods.
- Compute a range of variance types including the cost and quantity discrepancies of materials.
- Interpret the ramifications of both favorable and unfavorable variances.
Verified Answer
GK
Geoffrey KoppesApr 30, 2024
Final Answer :
a.Materials price variance = (Actual quantity × Actual price) − (Actual quantity × Standard price)= $64,090 − (3,400 meters × $18.30 per meter)= $64,090 − $62,220= $1,870 Unfavorableb.Standard Quantity = Standard quantity per unit × Actual output = 7.1 meters per unit × 500 units = 3,550 metersMaterials quantity variance = (Actual quantity − Standard quantity) × Standard price= (3,100 meters − 3,550 meters) × $18.30 per meter= −440 meters × $18.30 per meter= $8,235 Favorable
Learning Objectives
- Compute a range of variance types including the cost and quantity discrepancies of materials.
- Interpret the ramifications of both favorable and unfavorable variances.
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