The standards for product V28 call for 7.5 pounds of a raw material that costs $18.10 per pound. Last month, 1,400 pounds of the raw material were purchased for $24,990. The actual output of the month was 160 units of product V28. A total of 1,300 pounds of the raw material were used to produce this output.The direct materials purchases variance is computed when the materials are purchased.Required:a. What is the materials price variance for the month?b. What is the materials quantity variance for the month?
What will be an ideal response?
a.
Materials price variance = (AQ × AP) ? (AQ × SP)
= $24,990 ? (1,400 pounds × $18.10 per pound)
= $24,990 ? $25,340
= $350 F
b.
SQ = Standard quantity per unit × Actual output = 7.5 pounds per unit × 160 units = 1,200 pounds
Materials quantity variance = (AQ ? SQ*) × SP
= (1,300 pounds ? 1,200 pounds) × $18.10 per pound
= 100 pounds × $18.10 per pound
= $1,810 U
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