Question

Shelix Corp makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate
Direct materials	3.5 grams	1.00 per gram
Direct Labor	0.7 hours	11.00 per hour
Variable Overhead	0.7 hours	2.00 per hour

The company reported the following result concerning this product in August.

Actual output 3000 units

Raw materials used in production 11370 grams

Actual direct labor hours 1910 hours

Purchase of raw materials 12100 grams

Actual price of raw materials purchased 1.20 per gram

Actual direct labor rate 11.40 per hour

Actual variable overhead rate 2.10 per hour

The company applies variable overhead on the basis of direct labor hours. The direct materials purchase variance is computed when the materials are purchased.

The material quantity variance for August is:

A) 1044 Favorable

B) 1044 Unfavorable

C) 870 Favorable

D) 870 Unfavorable

Answer 1

Correct answer—(D) 870 Unfavorable

Actual DATA for		3000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	11370	$      1.20	$      13,644.00

Standard DATA for		3000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 3.5 Grams x 3000 Units)=10500 Grams	$     1.00	$       10,500.00

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	10500	-	11370	)	x	$       1.00
	-870
	Variance		$       870.00			Unfavourable-U