Question

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis...

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

Homework Answers

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
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