Figure 10-3Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor:
During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour.
-Refer to Figure 10-3. Compute the materials price variance and the materials usage variance, respectively.
A) $9,000 F and $1,200 U
B) $9,300 U and $1,500 F
C) $6,800 F and $4,000 U
D) $6,800 U and $4,000 F

Question

Figure 10-3Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor:
  During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour.
-Refer to Figure 10-3. Compute the materials price variance and the materials usage variance, respectively.
A) $9,000 F and $1,200 U 
B) $9,300 U and $1,500 F 
C) $6,800 F and $4,000 U 
D) $6,800 U and $4,000 F

Quizplus · Accepted Answer

The materials price variance is calculated as the difference between the actual price and the standard price, multiplied by the actual quantity. The materials usage variance is the difference between the actual quantity used and the standard quantity allowed, multiplied by the standard price. The given values lead to a favorable price variance of $6,800 and an unfavorable usage variance of $4,000.

Figure 10-3Bortello Corporation Produces High-Quality Leather Boots