Camps Inc. has a standard cost system. The standards for direct materials for one of its products specify 4.4 ounces of a particular input per unit of output at a standard cost of $6.40 per ounce. The company has reported the following actual results for the product for May:?Actual output2,900 units?Raw materials purchased14,600 ounces?Actual cost of raw materials purchased$86,140??Raw materials used in production12,770 ouncesRequired:a. Compute the materials price variance for this input for May.b. Compute the materials quantity variance for this input for May.
What will be an ideal response?
a. Materials price variance = (AQ × AP) - (AQ × SP)
= $86,140 - (14,600 ounces × $6.40 per ounce)
= $86,140 - $93,440
= $7,300 F
b. SQ = 2,900 units × 4.4 ounces per unit = 12,760 ounces
Materials quantity variance = (AQ × SP) - (SQ × SP)
= (AQ - SQ) × SP
= (12,770 ounces - 12,760 ounces) × $6.40 per ounce
= 10 ounces × $6.40 per ounce
= $64 U
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