Question

# Ruby Company produces a chair that requires 6 yards of material per unit. The standard price...

Ruby Company produces a chair that requires 6 yards of material per unit. The standard price of one yard of material is \$11.20. During the month, 6,700 chairs were manufactured, using 41,000 yards at a cost of \$10.64 per yard. Enter favorable variances as negative numbers.

 (a) Determine the price variance. \$(Favorable/Unfavorable) (b) Determine the quantity variance. \$(F/U) (c) Determine the cost variance. \$(F/U)

Price Variance = (Actual Unit Cost – Standard Unit Cost) * Actual Quantity
Price Variance = (\$10.64 - \$11.20) * 41,000
Price Variance = 22,960 (Unfavourable)

Quantity Variance = (Standard Quantity – Actual Quantity) * Standard Price
Standard Quantity = 6,700 * 6 = 40,200
Quantity Variance = (40,200 – 41,000) * \$11.20
Quantity Variance = 8,960 (Unfavourable)

Cost Variance = Price Variance + Quantity Variance
Cost Variance = 22,960 + 8,960
Cost Variance = 31,920 (Unfavourable)

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