If 2,300 lbs. were purchased for $8,970, but only 1,900 lbs. were used, the material variances would result in a favorable price variance of $25.30 and an unfavorable usage variance of $200. This indicates a cost advantage in material acquisition but inefficiency in material utilization.
Material variances are differences between the actual cost of materials used in production and the standard cost. These variances are often categorized into price and usage variances.
Material Price Variance:
Original Scenario (2,000 lbs. at $4 per lb.): Standard cost = 2,000 lbs. × $4 = $8,000.
Alternative Scenario (2,300 lbs. at $8,970): Actual cost per lb. = $8,970 / 2,300 lbs. ≈ $3.89.
Price Variance = (Standard Price - Actual Price) × Actual Quantity = ($4 - $3.89) × 2,300 lbs. = $25.30 (Favorable).
Material Usage Variance:
Original Scenario (2,000 lbs.): Standard cost = 2,000 lbs. × $4 = $8,000.
Alternative Scenario (1,900 lbs.): Standard cost = 1,900 lbs. × $4 = $7,600.
Usage Variance = (Standard Quantity - Actual Quantity) × Standard Price = (2,000 lbs. - 1,900 lbs.) × $4 = $200 (Unfavorable).
In summary, if 2,300 lbs. were purchased for $8,970 but only 1,900 lbs. were used, the material variances would be a favorable price variance of $25.30 and an unfavorable usage variance of $200.