The standard cost of Product B manufactured by TLC Company includes three units of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B. (a)compute the total materials variance and the price and quantity variances. (b)repeat (a), assuming the purchase price is $5.20 and the quantity purchased and used is 26,200 units.
(a) Total materials variance:
= ( AQ X AP ) – ( SQ X SP )
= (28,000 X $4.70) – (27,000* X $5.00)
= $131,600 – $135,000
= $3,400 F
*9,000 X 3
Materials price variance:
= ( AQ X AP ) – ( AQ X SP )
= (28,000 X $4.70) – (28,000 X $5.00)
= $131,600 – $140,000 = $8,400 F
Materials quantity variance:
= ( AQ X SP ) – ( SQ X SP )
= (28,000 X $5.00) – (27,000 X $5.00)
= $140,000 – $135,000
= $5,000 U
(b) Total materials variance:
= ( AQ X AP ) – ( SQ X SP )
= (26,200 X $5.20) – (27,000 X $5.00)
= $136,240 – $135,000
= $1,240 U
Materials price variance:
= ( AQ X AP ) – ( AQ X SP )
= (26,200 X $5.20) – (26,200 X $5.00)
= $136,240 – $131,000
= $5,240 U
Materials quantity variance:
= ( AQ X SP ) – ( SQ X SP )
= (26,200 X $5.00) – (27,000 X $5.00)
= $131,000 – $135,000
= $4,000 F
