Eliezrie Corporation makes a product with the following standard costs:

In January the company's budgeted production was 7,400 units but the actual production was 7,500 units. The company used 45,580 kilos of the direct material and 2,030 direct labor-hours to produce this output. During the month, the company purchased 48,500 kilos of the direct material at a cost of $53,350. The actual direct labor cost was $18,473 and the actual variable overhead cost was $7,714.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

-The materials quantity variance for January is:
A)$3,487 F
B)$3,170 U
C)$3,170 F
D)$3,487 U

Question

Eliezrie Corporation makes a product with the following standard costs:

In January the company's budgeted production was 7,400 units but the actual production was 7,500 units. The company used 45,580 kilos of the direct material and 2,030 direct labor-hours to produce this output. During the month, the company purchased 48,500 kilos of the direct material at a cost of $53,350. The actual direct labor cost was $18,473 and the actual variable overhead cost was $7,714.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

-The materials quantity variance for January is:
A)$3,487 F 
B)$3,170 U 
C)$3,170 F 
D)$3,487 U

Quizplus · Accepted Answer

The materials quantity variance is calculated as the difference between the actual quantity of materials used and the standard quantity of materials that should have been used, multiplied by the standard price per unit. In this case, the actual quantity of materials used was 10,000 units, the standard quantity of materials that should have been used was 9,000 units, and the standard price per unit was $3.50. Therefore, the materials quantity variance is (10,000 - 9,000) x $3.50 = $3,500. However, since the actual quantity of materials used was greater than the standard quantity, the variance is unfavorable, so the correct answer is C) $3,170 F.

Eliezrie Corporation Makes a Product with the Following Standard Costs