Asked by David Williams on May 17, 2024
Verified
Ravena Labs., Incorporated makes a single product which has the following standards:Direct materials: 2.5 ounces at $20 per ounceDirect labor: 1.4 hours at $12.50 per hourVariable manufacturing overhead: 1.4 hours at 3.50 per hourVariable manufacturing overhead is applied on the basis of standard direct labor-hours. The following data are available for October:3,750 units of compound were produced during the month.There was no beginning direct materials inventory.Direct materials purchased: 12,000 ounces for $225,000.The ending direct materials inventory was 2,000 ounces.Direct labor-hours worked: 5,600 hours at a cost of $67,200.Variable manufacturing overhead costs incurred amounted to $18,200.Variable manufacturing overhead applied to products: $18,375.The materials quantity variance for October is:
A) $52,500 Unfavorable
B) $52,500 Favorable
C) $12,500 Unfavorable
D) $12,500 Favorable
Materials Quantity Variance
The deviation of the actual material usage in manufacturing from the expected standard usage, multiplied by the cost per unit according to standard pricing.
Direct Materials
Raw materials that are directly used in the manufacturing of a product and are easily traceable to it.
Variable Manufacturing Overhead
Overhead costs that fluctuate with changes in production volume, such as utility expenses and machine maintenance.
- Acquire knowledge on how to calculate and conceptualize direct materials variances, focusing on the nuances of materials price and quantity differences.
Verified Answer
BR
Brittany ReneeMay 17, 2024
Final Answer :
C
Explanation :
To calculate the materials quantity variance, we need to compare the actual quantity of materials used with the standard quantity of materials that should have been used.
Standard quantity of materials = (2.5 oz per unit) x (3,750 units) = 9,375 oz
Actual quantity of materials = (12,000 oz purchased) - (2,000 oz ending inventory) = 10,000 oz
Materials quantity variance = (standard quantity - actual quantity) x standard price
= (9,375 oz - 10,000 oz) x $20/oz
= -$12,500 (unfavorable)
Therefore, the correct answer is C, $12,500 unfavorable.
Standard quantity of materials = (2.5 oz per unit) x (3,750 units) = 9,375 oz
Actual quantity of materials = (12,000 oz purchased) - (2,000 oz ending inventory) = 10,000 oz
Materials quantity variance = (standard quantity - actual quantity) x standard price
= (9,375 oz - 10,000 oz) x $20/oz
= -$12,500 (unfavorable)
Therefore, the correct answer is C, $12,500 unfavorable.
Learning Objectives
- Acquire knowledge on how to calculate and conceptualize direct materials variances, focusing on the nuances of materials price and quantity differences.