Question

Crown Point Jewelry produced 1,530 rings during March. The standard cost of each ounce of gold used in a ring is $1,000 per ounce. The standard quantity of material for each ring is a 0.5 ounce of gold per ring. The cost of gold purchased and used in March was $749,000 at $1,070 per ounce. Determine the material price variance and the material quantity variance for March. Indicate whether each variance is favorable or unfavorable. (Enter all variances as a positive number.)

Material price variance $

Neither Unfavorable nor FavorableUnfavorableFavorable

Material quantity variance $

Neither Unfavorable nor FavorableUnfavorableFavorable

Answer 1

ANSWER: All Amount in Dollars

Standard quantity for acual output	Standard price	Standard cost	Actual quantity	Actual price	Actual cost
765	1000	765000	700	1070	749000

Material cost variance = (Standard cost - Actual cost)

= (765000-749000)

= 16000

Material price variance = (Standard price - Actual price)*Actual quantity

= (1000 - 1070)*700

= 49000 unfavourable

Material quantity variance = (Standard quantity - Actual quantity)*Standard price

= (765 -700)*1000

= 65000 favourable

Working note:

1. Standard quantity = 1530*0.5

= 765

2. Actual quantity = Actual cost/Actual price

= 749000/1070

= 700