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The standard cost of Product B manufactured by Pharrell Company includes three units of direct materials at $5
The standard cost of Product B manufactured by Pharrell Company includes three units of direct materials at $5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70 per unit, and 29,000 units of direct materials are used to produce 9,400 units of Product B.
Instructions
(a) Compute the total materials variance and the price and quantity variances.
(b) Repeat (a), assuming the purchase price is $5.15 and the quantity purchased and used is 28,000 units
Expert Solution
a) Computation of the total material variance:-
Total material variance = (Actual quantity * Actual price) - (Standard quantity * Standard price)
= (29,000 * $4.70) - (9,400 * 3 * $5)
= $136,300 - $141,000
= $4,700 (F)
Computation of the materials price variance:-
Material price variance = (Actual quantity * Actual price) - (Actual quantity * Standard price)
= (29,000 * $4.70) - (29,000 * $5)
= $136,300 - $145,000
= $8,700 (F)
Computation of the material quantity variance:-
Material quantity variance = (Actual quantity * Standard price) - (Standard quantity * Standard price)
= (29,000 * $5) - (9,400 * 3 * $5)
= $145,000 - $141,000
= $4,000 (U)
b) Computation of the total material variance:-
Total material variance = (Actual quantity * Actual price) - (Standard quantity * Standard price)
= (28,000 * $5.15) - (9,400 * 3 * $5)
= $144,200 - $141,000
= $3,200 (U)
Computation of the materials price variance:-
Material price variance = (Actual quantity * Actual price) - (Actual quantity * Standard price)
= (28,000 * $5.15) - (28,000 * $5)
= $144,200 - $140,000
= $4,200 (U)
Computation of the material quantity variance:-
Material quantity variance = (Actual quantity * Standard price) - (Standard quantity * Standard price)
= (28,000 * $5) - (9,400 * 3 * $5)
= $140,000 - $141,000
= $1,000 (F)
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