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5 March, 21:16

Total Materials VarianceYoung Inc. produces plastic bottles. Production of 16-ounce bottles has a standard unit quantity of 0.45 ounce of plastic per bottle. During the month of June, 240,000 bottles were produced using 110,000 ounces of plastic. The actual cost of plastic was $0.042 per ounce, and the standard price was $0.045 per ounce. There is no beginning or ending inventories of plastic.

Calculate the materials price and usage variances using the columnar and formula approaches.

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  1. 5 March, 21:34
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    Price variance = $330 Favorable

    Usage variance = $90 Unfavorable

    Explanation:

    Formula approach

    Material price variance

    $ (0.045-0.042) * 110,000 = $330 Favorable

    Material Usage Variance

    (110,000) - (0.45*240,000) * 0.045 = $90 unfavorable

    Columnar Approach

    Price variance $

    Standard cost (0.045 * 110,000) = 4950

    Actual cost (0.042 * 110,000) = 4620

    Variance 330 Favorable

    Usage Variance

    Ounce

    Standard quantity (0.45*240,000) = 108000

    Actual quantity 110,000

    Variance in ounce 2000 unfavourable

    * Standard price 0.045

    Variance $90 Unfavorable
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