Question

JSH Inc. makes a unit called CC. CC has a standard of 2 yards of fabric for each CC. The standard price per yard of fabric is $3. During the period, JSH planned to make 6,400 units of CC, but actually made 6,000 CCs. JSH used 11,600 yards of fabric and incurred an actual cost of $34,500 for the fabric.

a. What is the sales volume variance for direct materials for the current period?

b. What is the direct material efficiency variance for the current period?

Answer 1

Budgeted Quantity ( BQ )= 6400 Units of CC = 6400 * 2 = 12,800 yards

Standard Quantity ( SQ )= 6000 Units of CC = 6000 * 2 = 12,000 yards

Actual Quantity ( AQ ) =11,600 yards

Standard Price ( SP ) = $ 3

Actual Price ( AP) = TOTAL COST/ ACTUAL QUANTITY= $ 34,500/11,600 = $ 2.97

(A) SALES VOLUME VARIANCE = ( AQ -BQ)BP = (11600 - 12800 ) $3 = 1200 * $3 =$ 3,600 (A)

Budgeted price and standard price are taken as same

(B) DIRECT MATERIAL EFFICIENCY VARIANCE = (SQ -AQ)SP =(12,000 -11,600 ) $3 = 400 * $3 =$1200(F)