Question

Pardoe, Inc., manufactures a single product. The company uses a standard cost system and has established the following standards for one unit of product:

	Standard Quantity of inputs	Standard Price or Rate per input	Standard Cost per unit
Direct materials	1.5 pounds	$3.20 per pound	$4.80
Direct labor	0.7 hours	$5.00 per hour	$3.50

Pardoe's budget for March used estimated production and sales of 2,900 units.

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

The company produced 3,000 units during the month.

A total of 5,000 pounds of material were purchased and used. The cost was $18,000.

During March, 2000 direct labor hours were worked at a rate of $5.50 per hour.

For all of these Pardoe questions, pick the closest answer numerically and then choose based on the U or F.

What would be the volume variance for materials for March?

	a.	$320 F
	b.	$480 U
	c.	$960 U
	d.	$960 F
	e.	$320 U
	f.	$480 F

Answer 1

	Standard PU	Qty	Rate	Costs
	Direct Material	1.50	3.20	4.80
	Budgeted Units	2900				Actual Units	3000
	Standard Total	Qty	Rate	Costs		Standard Total	Qty	Rate	Costs
	Direct Material	4,350	3.20	13,920		Direct Material	4,500	3.20	14,400
	Material Volume Variance:
	(Standard Units-Actual Units)*Standard Price
	(4350-4500)3.20
	-480	Unfavourable