Question

# Doogan Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price...

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

\$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.

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