Question

Crunchy Cereal Corporation uses a standard cost system for its cereal. The materials standard for each batch of cereal produced is 1.4 pounds of oats at a standard cost of $3.00 per pound. During the month of August, Crunchy purchased 78,000 pounds of oats at a total cost of $253,500. Crunchy used all of the oats to produce 60,000 batches of cereal. What is Crunchy's materials quantity variance for August?

		$18,000 favorable
		$19,500 unfavorable
		$54,000 unfavorable
		$1,500 favorable Which is correct?

Answer 1

Standard price = $3 per pound

Standard quantity = 1.4 pounds per unit

Actual quantity = 60,000 units

Standard quantity for actual output = Standard quantity x Actual output

= 1.4 x 60,000

= 84,000 pounds

Actual quantity = 78,000 pounds

Material quantity variance = Standard price x (Standard quantity - Actual quantity)

= 3 x (84,000-78,000)

= 3 x 6,000

= $18,000 favorable

Crunchy's materials quantity variance for August  $18,000 favorable

First option is correct.

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