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26 February, 15:26

A company uses the following standard costs to produce a single unit of output. Direct materials 6 pounds at $0.90 per pound = $5.40Direct labor 0.5 hour at $12.00 per hour = $6.00Manufacturing overhead 0.5 hour at $4.80 per hour = $2.40During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials quantity variance for the month was:a. $5,800 favorableb. $5,800 unfavorablec. $1,800 favorabled. $1,800 unfavorablee $1,000 favorable

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  1. 26 February, 15:35
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    c. $1,800 favorable

    Explanation:

    Given

    Direct materials 6 pounds at $0.90 per pound = $5.40

    Direct labor 0.5 hour at $12.00 per hour = $6.00

    Manufacturing overhead 0.5 hour at $4.80 per hour = $2.40

    Actual units produced 10,000

    Actual quantity purchased 58,000 pounds

    Actual price $1.00 per pound

    Actual hours 4,900

    Actual Direct labor costs $56,350

    Variable manufacturing overhead costs $15,000

    fixed manufacturing overhead $10,400

    Formula to use

    Direct materials quantity variance = (Standard Price * Actual Quantity) - (Standard Price * Standard Quantity)

    Calculations

    Direct materials quantity variance =

    (0.9*58000) - (0.9 * 6 pounds * 10,000 units)

    = 52,200 - 54000

    = 1,800 fav as standard quantity allowed is more than actual quantity used it is favorable.
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