Question

The standard cost of product 777 includes 2.9 units of direct materials at $6.8 per unit. During August, the company bought 29,200 units of materials at $6.90 and used those materials to produce 10,300 units. Compute the total, price, and quantity variances for materials.

Answer 1

Total Material Variance = $1,636 Favorable

Material Price Variance = $2,920 Unfavorable

Material Quantity Variance = $4,556 Favorable

Step-by-step explanation:

Total Material Variance = Standard Cost - Actual Cost

Standard Cost = Standard units
`*` Standard Price

Standard Units = 10,300
`*` 2.9 = 29,870 units

Standard cost = 29,870
`*` $6.8 = $203,116

Actual Cost = 29,200
`*` $6.90 = $201,480

Total Material Variance = $203,116 - $201,480 = $1,636 Favorable

Material Price Variance = (Standard Rate - Actual Rate)
`*` Actual Units

= ($6.8 - $6.9)
`*` 29,200 = - $2,920 Unfavorable

Material Quantity Variance = ( Standard Units - Actual Units)
`*` Standard Price

= (29,870 - 29,200)
`*` $6.8

= $4,556 Favorable

Final Answer

Total Material Variance = $1,636 Favorable

Material Price Variance = $2,920 Unfavorable

Material Quantity Variance = $4,556 Favorable