Ventura uses a just-in-time (JIT) manufacturing system for all its materials, components, and products. The master budget of the company for June called for use of 11,000 square feet of materials, while the flexible budget for the actual output of the month had 10,000 square feet of materials at a standard cost (SP) of $9.60 per square foot. Company records show that the actual price paid (AP) for the materials used in June was $9.50 per square foot, and that the direct materials purchase-price variance for the month was $1,040.

The materials usage (quantity) variance for June, to the nearest dollar, was:
A) $3,800 unfavorable.
B) $3,840 unfavorable.
C) $5,700 unfavorable.
D) $5,760 unfavorable.
E) $8,560 favorable.

Question

Ventura uses a just-in-time (JIT) manufacturing system for all its materials, components, and products. The master budget of the company for June called for use of 11,000 square feet of materials, while the flexible budget for the actual output of the month had 10,000 square feet of materials at a standard cost (SP) of $9.60 per square foot. Company records show that the actual price paid (AP) for the materials used in June was $9.50 per square foot, and that the direct materials purchase-price variance for the month was $1,040.

The materials usage (quantity) variance for June, to the nearest dollar, was:

The materials usage (quantity) variance for June, to the nearest dollar, was:
A) $3,800 unfavorable.
B) $3,840 unfavorable.
C) $5,700 unfavorable.
D) $5,760 unfavorable.
E) $8,560 favorable.

Quizplus · Accepted Answer

The materials usage (quantity) variance can be calculated as follows: (Actual Quantity Used - Standard Quantity Allowed for Actual Output) x Standard Price. Given that the standard quantity allowed for actual output is 10,000 square feet and the actual quantity used can be derived from the purchase-price variance formula: Purchase-Price Variance = (Actual Price - Standard Price) x Actual Quantity Used. Rearranging to find Actual Quantity Used = Purchase-Price Variance / (Actual Price - Standard Price) = $1,040 / ($9.50 - $9.60) = $1,040 / -$0.10 = -10,400 square feet. This indicates that 10,400 square feet were actually used. Thus, the materials usage variance is (10,400 - 10,000) x $9.60 = 400 x $9.60 = $3,840 unfavorable.

Ventura Uses a Just-In-Time (JIT) Manufacturing System for All Its