Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton's direct materials usage variance is:
A) $585 U.
B) $600 U.
C) $195
D) $200 U.

Question

Quizplus · Accepted Answer

The direct materials usage variance is calculated as (Actual Quantity Used - Standard Quantity Allowed) x Standard Price. The standard quantity allowed for 900 bags is 1,800 yards (900 bags x 2 yards per bag). The actual quantity used is 1,850 yards. The standard price is $4.00 per yard. Therefore, the variance is (1,850 yards - 1,800 yards) x $4.00 = 50 yards x $4.00 = $200 Unfavorable.

Carlton Corporation Carlton Corporation Produces and Sells Faux-Leather Handbags