Question

Exercise 23-5

The standard cost of Product B manufactured by Pharrell Company includes 2.2 units of direct materials at $6.1 per unit. During June, 27,200 units of direct materials are purchased at a cost of $5.90 per unit, and 27,200 units of direct materials are used to produce 12,200 units of Product B.

(a)

Compute the total materials variance and the price and quantity variances.

Total materials variance $

Favorable
Unfavorable
Neither favorable nor unfavorable
Materials price variance $

Unfavorable
Neither favorable nor unfavorable
Favorable
Materials quantity variance $

Unfavorable
Favorable
Neither favorable nor unfavorable

(b)

Compute the total materials variance and the price and quantity variances, assuming the purchase price is $6.20 and the quantity purchased and used is 26,800 units.

Total materials variance $

Favorable
Unfavorable
Neither favorable nor unfavorable
Materials price variance $

Neither favorable nor unfavorable
Unfavorable
Favorable
Materials quantity variance $

Unfavorable
Favorable
Neither favorable nor unfavorable

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Answer 1

a
Total materials variance = (27200*5.9)-(12200*2.2*6.1)= $3244 Favorable
Materials price variance = 27200*(5.9-6.1)= $5440 Favorable
Materials quantity variance = 6.1*(27200-12200*2.2)= $2196 Unfavorable
b
Total materials variance = (26800*6.2)-(12200*2.2*6.1)= $2436 Unfavorable
Materials price variance = 26800*(6.2-6.1)= $2680 Unfavorable
Materials quantity variance = 6.1*(26800-12200*2.2)= $244 Favorable