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Homework answers / question archive / Puvo, Inc
Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
Standard Price or Standard Standard Quantity Rate Cost Direct materials 2.0 pounds $ 5.50 per pound $11.00 Direct labor 0.6 hours $16.00 per hour $ 9.60 Variable manufacturing overhead 0.6 hours $ 3.75 per hour $ 2.25
During March, the following activity was recorded by the company:
• The company produced 5,000 units during the month. • A total of 13,500 pounds of material were purchased at a cost of $37,800. • There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,700 pounds of material remained in the warehouse. • During March, 3,200 direct labor-hours were worked at a rate of $16.50 per hour. • Variable manufacturing overhead costs during March totaled $7,400.
The direct materials purchases variance is computed when the materials are purchased.
The materials quantity variance for March is:
Computation of Material Quantity Variance:
Material Quantity Variance = Standard Rate * ( Standard Quantity for Actual Production - Actual Quantity Used)
= $5.50*((5,000*2) - (13,500-2,700))
= $5.50*(10,000-10,800)
= $5.50*-800
Material Quantity Variance = $4,400 (U)
