Question

The standards for product V28 call for 8.3 pounds of a raw material that costs $19.00 per pound. Last month, 2,200 pounds of the raw material were purchased for $41,360. The actual output of the month was 240 units of product V28. A total of 2,100 pounds of the raw material were used to produce this output.

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

Required:

a. What is the materials price variance for the month?

b. What is the materials quantity variance for the month?

Answer 1

Material Price Variance: It is the difference between the standard price and the Actual price of the material at the standard quantity

Material price Variance = (Standard price - Actual Price)*Actual Quantity

= ($19 - ($41,360 / 2,200)) * 2,100

= ($19 - $18.8) * 2,100

Material price Variance = $420

Actual price of the material is less than the standard price and hence, the material price variance is favorable.

Material Quantity Variance: It is the difference between the standard Quantity and the Actual Quantity at the standard Price of the material.

Material Quantity Variance = (Standard Quantity - Actual Quantity)*Standard price

= ((240*8.3) - 2,100)*$19

= (1,992 - 2,100)*$19

Material Quantity Variance = $2,052

Actual Quantity of the material is more than the standard Quantity and hence, the material Quantity variance is Unfavoraable.