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09.07.2022 - 03:24

Melrose Corporation makes a product that uses a material with the following standards: Standard quantity 8.4 pounds per unit Standard price $6.00 per pound Standard cost $50.40 per unit The compan

Question:

Melrose Corporation makes a product that uses a material with the following standards:

Standard quantity 8.4 pounds per unit

Standard price $6.00 per pound

Standard cost $50.40 per unit

The company budgeted for production of 5,800 units in September, but actual production was 5,900 units. The company used 50,210 pounds of direct material to produce this output. The company purchased 55,100 pounds of the direct material at $5.80 per pound. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for September is:

a. $3,770 F

b. $3,900 U

c. $3,770 U

d. $3,900 F

Answers (1)

Edythe April 8, 2023 в 09:53

The materials quantity variance for September is option c, $3,770 U (unfavorable). Explanation: The materials quantity variance measures the difference between the actual amount of direct material used and the standard amount of direct material that should have been used, based on the actual production volume. The formula for computing this variance is: Materials quantity variance = (Standard quantity - Actual quantity) x Standard price In this case, the standard quantity is 8.4 pounds per unit, and the company budgeted for production of 5,800 units, so the standard quantity for the actual production volume of 5,900 units is: Standard quantity = 8.4 pounds per unit x 5,900 units = 49,560 pounds The actual quantity of direct material used was 50,210 pounds, which is higher than the standard quantity: Materials quantity variance = (49,560 - 50,210) x $6.00 = ($-3,960) or $3,960 U This means that the company used more direct material than it should have, based on the actual production volume, resulting in a variance that is unfavorable to the company. Therefore, option c, $3,770 U, is the correct answer.

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