Question

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

	Standard Quantity			Standard Price or Rate			Standard Cost
Direct materials		1.5	pounds	$	4.50	per pound	$	6.75
Direct labor		0.6	hours	$	12.00	per hour	$	7.20
Variable manufacturing overhead		0.6	hours	$	2.75	per hour	$	1.65

During March, the following activity was recorded by the company:

• The company produced 4,200 units during the month.
• A total of 9,800 pounds of material were purchased at a cost of $27,440.
• There was no beginning inventory of materials on hand to start the month; at the end of the month, 1,960 pounds of material remained in the warehouse.
• During March, 2,720 direct labor-hours were worked at a rate of $12.50 per hour.
• Variable manufacturing overhead costs during March totaled $4,688.

The direct materials purchases variance is computed when the materials are purchased.

The materials quantity variance for March is:

Multiple Choice

• $6,930 F

• $14,140 F

• $14,140 U

• $6,930 U

Answer 1

Correct answer--------------$6,930 U

Working

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	6300	-	7840	)	x	$              4.50
	-6930
	Variance		$                6,930.00			Unfavourable-U

Actual quantity is actual quantity used.

Standard DATA for 4200 units
	Quantity (SQ)
	[A]
Direct Material	( 1.5 pounds x 4200 Units)=6300 pounds