Question

A manufactured product has the following information for June. Standard Actual Direct materials (7 lbs. @ $9 per lb.) 60,000 lbs. @ $9.20 per lb. Direct labor (3 hrs. @ $17 per hr.) 25,100 hrs. @ $17.60 per hour. Overhead (3 hrs. @ $11 per hour.) $ 286,800 Units manufactured 8,500 AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price Compute the direct materials price variance and the direct materials quantity variance. Indicate whether each variance is favorable or unfavorable.

Answer 1

price variance 12,000 U

quantity variance 4,500 U

Step-by-step explanation:

`(standard\:cost-actual\:cost) * actual \: quantity= DM \: price \: variance`

std cost $9.00

actual cost $9.20

quantity 60,000

These are givens so no calculation needed.

`(9-9.20) * 60,000= DM \: price \: variance`

difference $(0.20)

price variance $(12,000.00)

The difference is negative, we purchase at a higher price, so the variance is unfavorable

`(standard\:quantity-actual\:quantity) * standard \: cost = DM \: quantity \: variance`

std quantity 59500.00 (7 lbs per unit x 8,500 untis manufactured)

actual quantity 60000.00

std cost $9.00

`(59,500-60,000) * 9 = DM \: quantity \: variance`

difference -500.00

efficiency variance $(4,500.00)

The difference betwene standard lbs and the actual lbs used into production is negative, we use more lbs than standard. This variance is also unfavorable.