Question

A partial standard cost card for the single product produced by Mercer Company is given below:

Direct materials: 3 pounds @ $8 per pound

Direct labor:? hours @? per hour

Last period the company produced 4,000 units of product. Cost and other data associated with this production are given below:

Direct materials purchased and used, at cost

$103,320

Direct labor cost incurred (10,400 hours)

$120,640

Materials price variance

$2,520

Unfavorable

Labor efficiency variance

$4,800

Unfavorable

Total labor variance

$640

Unfavorable

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

Required:

Determine the materials quantity variance.

Answer 1

Standard price = $8 per pound

Standard quantity = 3 pounds per unit

Actual output = 4,000 units

Standard quantity for actual output = Standard quantity x Actual output

= 3 x 4,000

= 12,000 pounds
Actual cost = Actual quantity x Actual price = $103,320
materials price variance = Actual quantity x ( Standard price- Actual price)

-2,520 = Actual quantity x (8-Actual price)

-2,520 = 8 Actual quantity - Actual quantity x Actual price

-2,520 = 8 Actual quantity - 103,320

Actual quantity = 12,600

Direct material quantity variance = Standard price x ( Standard quantity - Actual quantity)

= 8 x (12,000-12,600)

= 8 x (-600)

= $4,800 Unfavorable