Taylor Enterprises purchased 56,000 pounds (cost = $420,000) of direct material to be used in the manufacture of the company's sole product. According the production specifications, each completed unit requires five pounds of direct material at a standard cost of $7.80 per pound. Direct materials consumed by the end of the period totaled 53,500 pounds in the manufacture of 10,900 finished units.
An examination of Taylor's payroll records revealed that the company worked 22,000 labor hours (cost = $319,000) during the period, and specifications called for each completed unit requiring two hours of labor at a standard cost of $14.80 per hour.
Assume that the company computes variances at the earliest point in time.
Taylor's direct-material quantity variance was:

Question

Quizplus · Accepted Answer

The direct-material quantity variance is calculated as (Actual Quantity Used - Standard Quantity Allowed) x Standard Price. Here, the actual quantity used is 53,500 pounds, and the standard quantity allowed for 10,900 units is 54,500 pounds (10,900 units x 5 pounds/unit). The standard price is $7.80 per pound. The variance is (53,500 - 54,500) x $7.80 = -1,000 x $7.80 = $7,800F (Favorable).

Taylor Enterprises Purchased 56,000 Pounds (Cost = $420,000) of Direct