Mcphail Inc. has a standard cost system. The standards for direct materials for one of its products specify 6.6 grams of a particular input per unit of output at a standard cost of $7.40 per gram. The company has reported the following actual results for the product for September:?Actual output5,700 units?Raw materials purchased41,900 grams?Actual price of raw materials$7.80 per gram ?Raw materials used in production37,630 gramsRequired:a. Compute the materials price variance for this input for September.b. Compute the materials quantity variance for this input for September.
What will be an ideal response?
a. Materials price variance = (AQ × AP) - (AQ × SP)
= AQ × (AP - SP)
= 41,900 grams × ($7.80 per gram ? $7.40 per gram)
= 41,900 grams × ($0.40 per gram)
= $16,760 U
b. SQ = 5,700 units × 6.6 grams per unit = 37,620 grams
Materials quantity variance = (AQ × SP) - (SQ × SP)
= (AQ - SQ) × SP
= (37,630 grams - 37,620 grams) × $7.40 per gram
= 10 grams × $7.40 per gram
= $74 U
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