Perez, Inc. recently completed 56,000 units of a product that was expected to consume four pounds of direct material per finished unit. The standard price of the direct material was $8.50 per pound. If the firm purchased and consumed 228,000 pounds in manufacturing (cost = $1,881,000), the direct-material quantity variance would be figured as:

Question

Quizplus · Accepted Answer

The direct-material quantity variance is calculated as (Actual Quantity - Standard Quantity) x Standard Price. The standard quantity for 56,000 units is 56,000 units x 4 pounds/unit = 224,000 pounds. The actual quantity used is 228,000 pounds. Therefore, the variance is (228,000 - 224,000) x $8.50 = 4,000 x $8.50 = $34,000. Since more material was used than the standard, the variance is unfavorable (U).