Standard Product Cost, Direct Materials Variance
Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,700 pounds) has the following standards:
Standard Quantity | Standard Price | |||
Whole tomatoes | 4,500 | lbs. | $ 0.44 | per lb. |
Vinegar | 250 | gal. | $ 2.70 | per gal. |
Corn syrup | 22 | gal. | $ 9.80 | per gal. |
Salt | 100 | lbs. | $ 2.40 | per lb. |
The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-111 were as follows:
4,700 lbs. of tomatoes |
240 gal. of vinegar |
23 gal. of corn syrup |
99 lbs. of salt |
a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.
Ingredient | Standard Cost per Batch |
Whole tomatoes | $ |
Vinegar | $ |
Corn syrup | $ |
Salt | $ |
Total | $ |
Standard unit materials cost per pound | $ |
b. Determine the direct materials quantity variance for batch K-111. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Ingredient | Materials Quantity Variance | Favorable/Unfavorable |
Whole tomatoes | $ | |
Vinegar | $ | |
Corn syrup | $ | |
Salt | $ | |
Total direct materials quantity variance | $ |
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Ans.a | Standard cost: | |||||
Ingredient (A) | Standard quantity (B) | Standard price (C) | Standard cost per batch (B*C) | |||
Whole tomatoes | 4500 | 0.44 | 1980 | |||
Vinegar | 250 | 2.7 | 675 | |||
Corn syrup | 22 | 9.8 | 215.6 | |||
Salt | 100.00 | 2.4 | 240 | |||
Total | 3110.6 | |||||
Standard unit materials cost per pound | 1.15 | |||||
Standard unit materials cost per pound = 3110.6 / 2700 pounds | ||||||
1.15 per pound | ||||||
Ans.b | Direct material Quantity variances; | |||||
Ingredient |
Material quantity variance | fav/unf | ||||
Whole tomatoes | -88 | U | ||||
Vinegar | 27 | F | ||||
Corn syrup | -9.8 | U | ||||
Salt | 2.4 | F | ||||
Total | -68.4 | U | ||||
Direct material Quantity variance = (SQ - AQ) * SP | ||||||
*Calculations; | ||||||
Whole tomatoes | (4500-4700)*0.44 | -88 | ||||
Vinegar | (250-240)*2.70) | 27 | ||||
Corn syrup | (22-23)*9.80 | -9.8 | ||||
Salt | (100-99)*2.40 | 2.4 | ||||
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