Question

# Crunchy Cereal Corporation uses a standard cost system for its cereal. The materials standard for each...

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?

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.

Kindly comment if you need further assistance.

Thanks‼!

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