Question

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard Quantity Standard Price or Rate Standard Cost Direct materials 2.0 pounds $ 7.75 per pound $ 15.50 Direct labor 0.5 hours $ 25.00 per hour $ 12.50 Variable manufacturing overhead 0.5 hours $ 6.00 per hour $ 3.00 During March, the following activity was recorded by the company: The company produced 6,800 units during the month. A total of 17,100 pounds of material were purchased at a cost of $47,880. There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,420 pounds of material remained in the warehouse. During March, 3,600 direct labor-hours were worked at a rate of $25.50 per hour. Variable manufacturing overhead costs during March totaled $11,000. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for March is:

Answer 1

Answer:

620 Unfavorable

Explanation:

Given that,

Direct materials (Standard Quantity) = 2.0 pounds

Direct materials (Standard Price) = $7.75 pounds

Units produced by company = 6,800

Materials quantity variance :

= (standard quantity - Actual quantity) × standard price

= [(2.0 × 6,800) - (17,100 - 3,420)] × $7.75

= (13,600 - 13,680) × $7.75

= 620 Unfavorable