Question

Summerlin Company budgeted 5,200 pounds of material costing $4.00 per pound to produce 2,000 units. The company actually used 5,700 pounds that cost $4.10 per pound to produce 2,000 units. What is the direct materials quantity variance?

Answer 1

$2,570F

Step-by-step explanation:

Variances refer to the difference between standard costs and actual costs. Standard costs are also referred to as Budgeted costs. Direct Material Variance can be mathematically calculated as Material Price Variance + Usage (Quantity) Variance or simply, (Standard price × standard quantity) - (Actual price × actual quantity). Using figures to replace words, we now have; ($4.00 × 5,200 units) - ($4.10 × 5,700 units) = $20,800 - $23,370 = $2,570F.

We used "F" whichich indicates favourable for the answer because here, standard is higher than actual. Higher standard costs are preferable in material variances.