Question

Doogan Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 2.0 grams $ 7.00 per gram Direct labor 1.6 hours $ 14.00 per hour Variable overhead 1.6 hours $ 2.00 per hour The company produced 4,600 units in January using 10,220 grams of direct material and 2,200 direct labor-hours. During the month, the company purchased 10,790 grams of the direct material at $7.40 per gram. The actual direct labor rate was $14.50 per hour and the actual variable overhead rate was $1.70 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: Multiple Choice $7,548 U $7,548 F $7,140 F $7,140 U

Answer 1

Answer:

Correct answer is:

$7,140 U

Explanation:

Standard Quantity per unit of output =  2.0 grams

The company produced 4,600 units in January

Standard quantity for actual production of 4,600 units = 4,600 * 2.0 = 9,200 grams

Actual Quantity of direct material used = 10,220 grams

Standard Price = $ 7.00 per gram

Materials quantity variance = (Standard Quantity - Actual quantity) * Standard Price

Materials quantity variance for January = (9,200 -10,220) * $7.00 = - $7,140 = $7,140 U

Materials quantity variance for January= $7,140 U

As such option D is correct and other options A, B and C are incorrect.