The Armstrong Corporation developed a flexible budget for its production process. Armstrong budgeted to use 12,000 pounds of direct material with a standard cost of $14 per pound to produce 14,000 units of finished product. Armstrong actually purchased 24,000 pounds and used 15,000 pounds of direct material with a cost of $30 per pound to produce 14,000 units of finished product. Given these results, what is Armstrong's direct material quantity variance?

Question

Quizplus · Accepted Answer

The direct material quantity variance is calculated as (Actual Quantity Used - Standard Quantity Allowed) x Standard Cost per Unit. The standard quantity allowed for 14,000 units is 12,000 pounds (as per the budget). The actual quantity used is 15,000 pounds. The standard cost per pound is $14. Therefore, the variance is (15,000 - 12,000) x $14 = 3,000 x $14 = $42,000 unfavorable, because more material was used than was budgeted for the actual level of production.

The Armstrong Corporation Developed a Flexible Budget for Its Production