Question

The following standards have been established for a raw material used to make product O84:

Standard quantity of the material per unit of output		7.4	meters
Standard price of the material	$	18.50	per meter

The following data pertain to a recent month's operations:

Actual material purchased		3,700	meters
Actual cost of material purchased	$	71,780
Actual material used in production		3,400	meters
Actual output		530	units of product O84

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?
(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Actual material purchased = 3700 meters

Actual cost of material purchased = 71780

Actual price per unit = 71780/3700 = 19.4

a.) Material price variance =

(Standard price - Actual price)*Actual quantity

=(18.50 - 19.4)*3400 = 3060 U

b.)Standard quantity for actual output

= standard quantity of per unit of output * Actual output

= 7.4 meters*530 = 3922 meters

Actual quantity = 3400 meters

Material quantity Variance

= (Standard quantity - Actual quantity )*standard price

=(3922-3400)*18.50= 9657 F