Question

Simba Company's standard materials cost per unit of output is $10.50 (2.50 pounds x $4.20). During July, the company purchases and uses 2,700 pounds of materials costing $14,580 in making 1,200 units of finished product. Compute the total, price, and quantity materials variances. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.) Total materials variance $___________. Materials price variance $___________.Materials quantity variance $___________.

Answer 1

Answer:

Total material variance= $1,980 unfavorable

Direct material quantity variance= $1,260 favorable

Direct material quantity variance= $1,260 favorable

Explanation:

Giving the following information:

Simba Company's standard materials cost per unit of output is $10.50 (2.50 pounds x $4.20). During July, the company purchases and uses 2,700 pounds of materials costing $14,580 in making 1,200 units of the finished product.

The total variance is the difference between the estimated total cost for 1,200 units and the actual cost:

Total material variance= total estimated cost - total actual cost

Total material variance= (2.5*4.20*1,200) - 14,580= 1,980 unfavorable

Now, we can dissect the variance in price and quantity:

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (4.2 - 14580/2,700)*2,700

Direct material price variance= (4.2 - 5.4)*2,700= 3,240 unfavorable

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (2.5*1,200 - 2,700)*4.2

Direct material quantity variance= (3,000 - 2,700)*4.2= $1,260 favorable

Total variance= 3,240 unfavorable - 1,260 favorable= 1,980 unfavorable