Question

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram $2.50
Actual kilograms of material used 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hours
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hour
Actual total factory overhead $34,900
Actual fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
Maximum plant capacity 15,000 hours
Units completed during the period 5,000
The direct materials cost variance is:_________.

Answer 1

Materials Cost Variance = 6500 favorable

Step-by-step explanation:

Frogue Corporation

AP= Actual price per kilogram $2.50

AQ= Actual kilograms of material used 31,000

SP = Standard price per kilogram $2.80

SQ= Standard kilograms per completed unit 6 kilograms = 5000 units *6 kg= 30,000 kg

Material Price Variance =( AP -SP)(AQ)=

= ( $2.50- $2.80)31,000 = 9300 Favorable

It is favorable because the standard price is higher than the actual price.

Material Quantity Variance =( AQ -SQ)(AP)= (31000- 30,000) 2.8

= 1000*2.8= 2800 unfavorable

It is unfavorable because the standard quantity is lower than the actual quantity.

Materials Cost Variance =Material Price Variance+Material Quantity Variance

=9300 Favorable+2800 unfavorable=

Materials Cost Variance = 6500 favorable

When favorable and unfavorable are added the unfavorable is with negative sign so they are subtracted.