Products manufactures faux boulders to be used in various landscaping applications. A special resin is used to make the boulders. The standard quantity of resin used for each boulder is 2 pounds. Mitchell Products uses a standard cost of $ 1.80 per pound for the resin. The company produced 11 comma 000 boulders in June. In that month, 21 comma 750 pounds of resin were purchased at a total cost of $ 43 comma 500. A total of 21 comma 500 pounds were used in producing the boulders in June.

Requirements

a. Calculate the direct material price variance.

b. Calculate the direct material quantity variance.

Question

Giovanna Estes

Business

8 February, 23:59

Products manufactures faux boulders to be used in various landscaping applications. A special resin is used to make the boulders. The standard quantity of resin used for each boulder is 2 pounds. Mitchell Products uses a standard cost of $ 1.80 per pound for the resin. The company produced 11 comma 000 boulders in June. In that month, 21 comma 750 pounds of resin were purchased at a total cost of $ 43 comma 500. A total of 21 comma 500 pounds were used in producing the boulders in June.

Requirements

a. Calculate the direct material price variance.

b. Calculate the direct material quantity variance.

+4

Answers (1)

Know the Answer?

Levi Cardenas · Answer 1

a. $4,300 Adverse

b. $900 favorable

Explanation:

a. Calculate the direct material price variance.

Actual cost of resin per pound = $43,500 / 21,750 = $2 per pound

Direct material price variance = (21,500 * $2) - (21,500 * $1.80) = $43,000 - $38,700 = $4,300 Adverse

b. Calculate the direct material quantity variance.

Total standard quantity = 2 * 11,000 = 22,000 pounds

Direct material quantity variance = $1.80 * (22,000 - 21,500) = $900 favorable