Final answer:
The quantity variance of raw materials used for Riverside Incorporated, which resulted in a $4,800 favorable budget variance for August, is attributed to the use of 400 pounds less than the standard amount of raw materials, resulting in an $8,000 favorable quantity variance.
Step-by-step explanation:
The student's question pertains to calculating the quantity variance of the raw materials used in production for Riverside Incorporated. To solve for the quantity variance, we have to compare the standard quantity of materials expected to be used for the actual production to the actual quantity used, multiplied by the standard cost per unit of raw material. The standard cost is given as $60, which consists of 3 pounds at $20 per pound. However, the actual cost reported is $57.60, with 3.2 pounds being used per unit at $18 per pound.
First, we calculate the standard quantity of materials for the actual production:
- Standard quantity for 2,000 units = 2,000 units x 3 pounds/unit = 6,000 pounds
- Actual quantity used = 2,000 units x 3.2 pounds/unit = 6,400 pounds
- Quantity variance = (Actual quantity - Standard quantity) x Standard cost per pound
= (6,400 pounds - 6,000 pounds) x $20/pound
= 400 pounds x $20/pound
= $8,000
The unfavorable (U) or favorable (F) status of the variance is determined by whether the actual quantity used is more than the standard (unfavorable) or less (favorable). Here, the result is a $8,000 favorable variance, showing that less raw material was used than the standard amount.