Question

Jim Beam has a direct materials standard of 2 gallons of input at a cost of $10.50 per gallon. During July, JB purchased and used 6,650 gallons, paying $46,700. The direct materials quantity variance was $1,785 unfavorable. How many units were produced?

Answer 1

Given That : Standard Quantity of Material = 2 Gallons per unit.

Standard Rate = $10.50 per gallon.

Actual Quantity used = 6,650 gallons.

Material Quantity Variance = $1,785 (Unfavourable) = -1,785

To find : How many units were produced i.e. Actual Output.

Solution : We know that Material Quantity Variance (MQV) is given by the following formula :

MQV = (Standard Quantity for Actual Output Produced - Actual Quantity Used) * Standard Rate

i.e. -1785 = (2 * Actual Output Produced - 6,650) * 10.50

Solving the above we get, Actual output Produced= 3,240 units.

Thus, 3,240 units were produced.