Question

A company uses the following standard costs to produce a single unit of output.Direct materials 6 pounds at $0.90 per pound = $5.40Direct labor 0.5 hour at $12.00 per hour = $6.00Manufacturing overhead 0.5 hour at $4.80 per hour = $2.40During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials quantity variance for the month was:a. $5,800 favorableb. $5,800 unfavorablec. $1,800 favorabled. $1,800 unfavorablee $1,000 favorable

Answer 1

c. $1,800 favorable

Step-by-step explanation:

Given

Direct materials 6 pounds at $0.90 per pound = $5.40

Direct labor 0.5 hour at $12.00 per hour = $6.00

Manufacturing overhead 0.5 hour at $4.80 per hour = $2.40

Actual units produced 10,000

Actual quantity purchased 58,000 pounds

Actual price $1.00 per pound

Actual hours 4,900

Actual Direct labor costs $56,350

Variable manufacturing overhead costs $15,000

fixed manufacturing overhead $10,400

Formula to use

Direct materials quantity variance =(Standard Price * Actual Quantity)-(Standard Price * Standard Quantity)

Calculations

Direct materials quantity variance =

(0.9*58000)- (0.9 *6 pounds *10,000 units)

= 52,200- 54000

= 1,800 fav as standard quantity allowed is more than actual quantity used it is favorable.