Question

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

	Standard Quantity			Standard Price or Rate			Standard Cost
Direct materials		2.5	pounds	$	5.75	per pound	$	14.38
Direct labor		0.5	hours	$	17.00	per hour	$	8.50
Variable manufacturing overhead		0.5	hours	$	4.00	per hour	$	2.00

During March, the following activity was recorded by the company:

• The company produced 5,200 units during the month.
• A total of 16,500 pounds of material were purchased at a cost of $46,200.
• There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,300 pounds of material remained in the warehouse.
• During March, 2,800 direct labor-hours were worked at a rate of $17.50 per hour.
• Variable manufacturing overhead costs during March totaled $5,800.

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

The materials quantity variance for March is:

Multiple Choice

A. $1,150 F

B. $26,200 F

C. $26,200 U

D. $1,150 U

Answer 1

Correct answer----------D. $1,150 U

Working

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	13000	-	13200	)	x	$ 5.75
	-1150
	Variance		$             1,150.00			Unfavourable-U

.

Standard DATA for		5200	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 2.5 pound x 5200 Units)=13000 pound	$                   5.75	$            74,750.00