Question

Simba Company’s standard materials cost per unit of output is $10.00 (2.00 pounds x $5.00). During July, the company purchases and uses 3,200 pounds of materials costing $16,192 in making 1,500 units of finished product.

Answer 1

Material Cost variance = Standard cost - Actual cost

= 3000*5 - 16192

= 1192 A

Material Rate Variance = (S.R. - A.R.)A.Q

= (5 - 5.06)3200

= 192 A

Material usage variance = (S.Q. - A.Q.)S.R

= (3000 - 3200)5

= 1000 A

Working Notes:

Actual Output = 1500 units

Standard qty of Material for Actual Output = 1500*2

= 3000 pounds

Actual qty. used = 3200 pounds

Actual rate/pound = $16192/3200

= $5.06