Question

Materials Variances

Manzana Company produces apple juice sold in gallons. Recently, the company adopted the following material standard for one gallon of its apple juice:

     Direct materials 128 oz. @ $0.05 = $6.40

During the first week of operation, the company experienced the following results:

1. Gallon units produced: 23,000.
2. Ounces of materials purchased and used: 2,750,000 ounces at $0.045.
3. No beginning or ending inventories of raw materials.

Required:

Note: Enter favorable values as negative numbers. Enter unfavorable values as positive numbers.

1. Compute the materials price variance.
$ Favorable

2. Compute the materials usage variance.
$ Favorable

3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $23,000 unfavorable. The company purchased and used 2,075,000 ounces of material during this week. How many gallons of juice were produced? If required, round your answer to nearest whole value.
gallons

What was the actual price paid per ounce of materials? Round your answer to the nearest cent.
$ per ounce

Answer 1

1
Materials price variance	-13750	Favorable	=2750000*(0.045-0.05)
2
Materials usage variance	-9700	Favorable	=0.05*(2750000-23000*128)

3
4000 = 0.05*(2075000-Standard materials)
80000 = 2075000-Standard materials
Standard materials = 2075000-80000 = 1995000
Gallons of juice produced	15586	gallons	=1995000/128
Extra price paid per ounce	0.01		=23000/2075000
Actual price paid per ounce	0.06	per ounce	=0.05+0.01