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A company uses the following standard costs to produce a single unit of output
A company uses the following standard costs to produce a single unit of output.
DM 8 pounds at $0.80 per pound = $6.40
DL 0.50 hour at $9.00 per hour = $4.50
Manufacturing overhead 0.50 hour at $4.40 per hour = $2.20
During the latest month, the company purchased and used 76,000 pounds of direct materials at a price of $1.10 per pound to produce 10,000 units of output. DL costs for the month totaled $41,710 based on 4,850 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $18,000 and fixed manufacturing overhead incurred was $12,000. Based on this information, the direct materials quantity variance for the month was:
Expert Solution
Computation of the direct materials quantity variance:-
Direct materials quantity variance = (Standard quantity - Actual quantity) * Standard price
= ((10000*8) - 76000) * $0.80
= (80000 - 76000) * $0.80
= 4000 * $0.80
= $3,200 (F)
The direct materials quantity variance is favorable because the actual quantity is lower than the standard quantity.
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