A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z.The company has just produced 1,000 units of this product,using 5,200 pounds of Material J that cost $9,880.The direct materials quantity variance is:
A)$400 unfavorable.
B)$120 favorable.
C)$400 favorable.
D)$520 favorable.
E)$520 unfavorable.

Question

Quizplus · Accepted Answer

The direct materials quantity variance is calculated as (Actual Quantity - Standard Quantity) x Standard Price. Here, the standard quantity for 1,000 units is 5,000 pounds (1,000 units x 5 pounds/unit). The actual quantity used is 5,200 pounds. The standard price is $2 per pound. Thus, the variance is (5,200 - 5,000) x $2 = 200 x $2 = $400 unfavorable.

A Company Has Established 5 Pounds of Material J at $2