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Whitley Company makes a product that is expected to use 1.2 pounds of material per unit...

Whitley Company makes a product that is expected to use 1.2 pounds of material per unit of product. The material has a standard cost of $2 per pound. Whitley Company actually used 1.25 pounds of material per unit of product made in January 2015. The actual cost of material was $1.95 per pound. Based on this information, the materials variances for January 2015 production would be: (Circle or highlight one) A) U for price and U for usage • Flashcards • Models • Federal Taxes • Categories • Companies • 25 Pounds • Acct • Administrative Support • Annual Sale • Be 10 • Flashcards • Models B) U for price and F for usage C) F for price and U for usage D) F for price and F for usage

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Answer #1

Ans is C) F for price and U for usage

Explanation: Material variances is of two types, one for price and other for usage, if actual quantity used in production is higher than standard quantity then Usage variance is Unfavorable and vice versa.

In same way if price of material is higher than standard price set it is unfavorable and vice versa.

In the present case:

1.25 Pounds(AQ) > 1.2 Pounds(SQ) I.e Usage variance is unfavorable

$1.95 (AP) < $2(SP) i.e. Price variance is Favorable

So Option C is correct and other options are incorrect

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