Question

Total Materials VarianceYoung Inc. produces plastic bottles. Production of 16-ounce bottles has a standard unit quantity of 0.45 ounce of plastic per bottle. During the month of June, 240,000 bottles were produced using 110,000 ounces of plastic. The actual cost of plastic was $0.042 per ounce, and the standard price was $0.045 per ounce. There is no beginning or ending inventories of plastic.

Calculate the materials price and usage variances using the columnar and formula approaches.

Answer 1

Price variance = $330 Favorable

Usage variance = $90 Unfavorable

Step-by-step explanation:

Formula approach

Material price variance

$(0.045-0.042)× 110,000 = $330 Favorable

Material Usage Variance

(110,000)-(0.45×240,000) × 0.045 = $90 unfavorable

Columnar Approach

Price variance $

Standard cost (0.045 × 110,000 ) = 4950

Actual cost (0.042 × 110,000 ) = 4620

Variance 330 Favorable

Usage Variance

Ounce

Standard quantity (0.45×240,000) = 108000

Actual quantity 110,000

Variance in ounce 2000 unfavourable

× Standard price 0.045

Variance $90 Unfavorable