15.3 Direct Materials Variances Flashcards
A favorable materials price variance coupled with an unfavorable materials usage variance most likely results from
A. Machine efficiency problems
B. Product mix production changes
C. The purchases and use of higher-than-standard quality materials.
D. The purchases of lower than standard quality materials.
D. The purchases of lower than standard quality materials.
A favorable materials price variance is the result of paying less than the standard price for materials. An unfavorable materials usage variance is the result of using an excessive quantity of materials. If a purchasing manager were to buy standard materials achieve a favorable price variance, an unfavorable quantity variance could result from using an excessive amount of poor quality materials.
During the month of May, the company experienced a significant unfavorable material efficiency variance in the production of its single product at one of the company’s plants. Which one of the following reasons would be least likely to explain why the unfavorable variance arose?
A. Inferior materials were purchased
B. Actual production was lower than planned production
C. Workers used were less skilled than expected
D. Replacement production equipment had just been installed
B. Actual production was lower than planned production
A company began business on January 1 of the current year. The firm’s standard cost system allows for 4 yards of fabric at $1.55 per yard for each finished unit of product. During the year, the company produced 20,000 units of finished product and sold 18,000 units. Although there was no work-in-process inventory at the end of the year, there were 2,100 yards of fabric included in the ending raw materials inventory. If the materials quantity variance was $1,240 unfavorable, how many yards of fabric did the company buy during the year?
A. 72,800 yards
B. 74,900 yards
C. 80,800 yards
D. 82,900 yards
D. 82,900
SP = $1.55
$1240 / 1.55 = 800 extra yards of fabric used
Finished product = 20,000 units x 4 yards = 80,000
Total yards used = 80,000 + 800 = 80,800
yards used = 80,800 + yards in ending inventory 2,100 = 82,900
The controller for Durham Skates is reviewing the production cost report for July. An analysis of direct materials costs reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a flexible budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result because she claims to have saved $1,200 in materials cost on actual production using 4,900 units of direct materials. The standard materials cost is $12 per unit. Actual materials used for the month amounted to $60,025.
If Durham’s direct materials variance is investigated further, it will reflect a price variance of
A. $1,225 unfavorable
B. $2,500 favorable
C. $1,200 favorable
D. Zero
A. $1,225 unfavorable
The price variance = actual quantity x (actual price - standard price)
- actual price: $12.25 (60,025 / 4,900 units)
- standard price: $12 (given)
4,900 units x (12.25 actual - 12 standard) = $1,225
A company established its annual direct material budget to produce 300,000 units as follows.
150,000 pounds of material at $0.75 per pound = $112,500
Throughout the year, the company produced 310,000 units of finished goods using 0.48 pounds per unit at a cost of $0.76 per pound. The direct material efficiency variance is
A. $4,650 favorable
B. $900 favorable
C. $588 unfavorable
D. $1,488 unfavorable
A. $4,650 favorable
Direct material efficiency variance = (SQ - AQ) x SP
For a production level of 310,000, the direct materials needed equals 155,000 pounds [310,000 x (150,000 / 300,000)], and materials actually used was 148,800 pounds (310,000 x 0.48). Thus, the variance is $4,650 favorable
SP = 0.75
AQ = 148,800
SQ = 155,000
The controller for Durham Skates is reviewing the production cost report for July. An analysis of direct materials costs reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a flexible budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result because she claims to have saved $1,200 in materials cost on actual production using 4,900 units of direct materials. The standard materials cost is $12 per unit. Actual materials used for the month amounted to $60,025.
Durham’s actual average cost per unit for materials was
A. $12.25
B. $12.01
C. $12.00
D. $12.24
A. $12.25
Dividing the actual cost of $60,025 by the 4,900 units used results in an average cost of $12.25 per unit.
A company isolates its raw material price variance in order to provide the earliest possible information to the manager responsible for the variance. The budgeted amount of material usage for the year was computed as follows:
150,000 units of finished goods × 3 lbs./unit × $2.00/lb. = $900,000
Actual results for the year were the following:
* Finished goods produced: 160,000 units
* Raw materials purchased: 500,000 pounds
* Raw materials used: 490,000 pounds
* Cost per pound: $2.02
The raw material price variance for the year was
A. $9,800 unfavorable
B. $9,600 unfavorable
C. $20,000 unfavorable
D. $10,000 unfavorable
D. $10,000 unfavorable
The direct materials price variance, when it is isolated early, is calculated as the quantity purchased times the standard price minus the actual price (this firm has decided that waiting until the quantity actually used is known delays the usefulness of the calculation).
The calculation is therefore
[500,000 x ($2.00 - $2.02)] = $10,000 unfavorable
A company uses a standard-costing system in relation to its manufacture of scarves. Each finished scarf contains 1.5 yards of direct materials. However, a 25% direct materials spoilage, which is calculated based on input quantities, occurs during the manufacturing process. The cost of the direct materials is $2 per yard. The standard direct materials cost per unit of finished product is
A. $3.75
B. $2.25
C. $3.00
D. $4.00
D. $4.00
If 1.5 yards remain in each unit after spoilage of 25% of the direct materials input, the total per unit input must have been 2 yards (1.5 / 75%). The standard materials cost is therefore $4 (2 yards x $2)
A company’s master budget indicated that 50,000 units of finished goods should be produced using 25,000 feet of materials at $4 per foot. The company actually produced 48,000 units of finished goods, purchased 27,000 feet of materials at $4.25 per foot, and used 25,000 feet of materials in production. The direct material efficiency variance is
A. $8,000 unfavorable
B. $4,000 unfavorable
C. $6,000 unfavorable
D. $0
B. $4,000 unfavorable
The actual quantity (AQ) used in production is used for direct materials efficiency variance calculation.
AQ = 25,000 feet
The standard quantity (SQ) allowed based on actual production uses the standard for materials per unit. The standard is based on the budgeted 50,000 units and 25,000 feet, which means 0.5 feet per unit. The SQ is therefore 0.5 fee per unit x 48,000 units = 24,000 feet.
The variance is $4,000 [(24,000 - 25,000 feet) x $4]. The variance is unfavorable because the AQ used was greater than the standard quantity allowed.
A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, which has a standard cost of $2.90 per unit. During June, the company had the following experience with respect to Part X:
- Purchases ($36,000): 12,000 units
- Consumed in manufacturing: 10,000
- Radios manufactured: 3,000
Assuming that budgeted and actual radio production was the same, the amount that will be shown on a static budget for Part X usage during the month of June is
A. $29,000
B. $27,000
C. $36,000
D. $26,100
D. $26,100
The 3,000 radios require three units each of Part X, a total of 9,000 units. At a standard unit cost of $2.90, the 9000 units will total $26,100.
A company uses a standard cost system. The standard for each finished unit of product allows for 3 pounds of plastic at $0.72 per pound. During December, the company bought 4,500 pounds of plastic at $0.75 per pound, and used 4,100 pounds in the production of 1,300 finished units of product. What is the materials purchase price variance for the month of December?
A. $117 unfavorable
B. $150 unfavorable
C. $123 unfavorable
D. $135 unfavorable
D. $135 unfavorable
The materials purchase price variance equals the quantity purchased multiplied by the difference between the standard price and the actual price, or $135 unfavorable.
4500lbs x (.75-.72)
Fact Pattern: A company manufactures one product and has a standard cost system. In April the company had the following experience:
Actual $/unit of input (lbs. & hrs.)
Direct Materials: $28
Direct labor: $18
Standard price/unit of input
Direct Materials: $24
Direct Labor: $20
Standard inputs allowed per unit of output
Direct Materials: 10
Direct Labor: 4
Actual units of input
Direct Materials: 190,000
Direct Labor: 78,000
Actual units of output
Direct Materials: 20,000
Direct Labor: 20,000
The direct materials efficiency variance for April is
A. $760,000 unfavorable
B. $156,000 favorable
C. $240,000 favorable
D. $240,000 unfavorable
C. $240,000 favorable
The direct materials efficiency variance equals the standard quantity minus the actual quantity, times standard price. The variance is $240,000 favorable [(10 x 20,000) - 190,000] x 24. The variance is favorable because the actual quantity was less than the standard quantity allowed for the actual output.
Blaster, Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio requires three units each of Part XBEZ52, which has a standard cost of $1.45 per unit. During May, Blaster experienced the following with respect to Part XBEZ52:
Purchases ($18,000): 12,000 units
Consumed in manufacturing: 10,000
Radios manufactured: 3,000
During May, Blaster incurred a purchase price variance of
A. $600 unfavorable
B. $500 favorable
C. $450 unfavorable
D. $450 favorable
A. $600 unfavorable
Blaster’s purchase price variance is calculated as follows:
Purchase price variance = AQ x (SP - AP)
= 12,000 parts x (1.45-1.50)
= 12,000 x -0.05
= $600 unfavorable
The financial statements have just arrived showing a $3,000 loss on the new stadium job that was budgeted to show a $6,000 profit. Actual and budget information relating to the materials for the job are as follows.
Bricks – number of bundles
Actual: 3,000
Budget: 2,850
Bricks – cost per bundle
Actual: $7.90
Budget: $8.00
Which one of the following is a correct statement regarding the stadium job?
A. The flexible budget variance was unfavorable by $900
B. The price variance was favorable by $300
C. The efficiency variance was unfavorable by $1,185
D. The price variance was favorable by $285
B. The price variance was favorable by $300
The direct materials price variance is defined as the actual quantity used in production times the standard price minus the actual price. This calculation is [3,000 units x ($8 - 7.90)] = $300 favorable.
ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of direct materials in inventory were purchased for $105,000, and two units of direct materials are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for materials was $60,000, and the unfavorable quantity variance was $2,500.
ChemKing’s units of direct materials used to produce November output totaled
A. $12,000 units
B. $12,500 units
C. $25,000 units
D. $23,000 units
C. $25,000 units
The company produced 12,000 units of output, each of which required two units of direct materials. Thus, the standard input allowed for direct materials was 24,000 units at a standard cost of $2.50 each [$60,000 / (12,000 units of output x 2 units of direct materials)]. An unfavorable quantity variance signifies that the actual quantity used was greater than the standard input allowed. The direct materials quantity variance equals the standard price per unit times the difference between actual and standard quantities. Consequently, because 1,000 ($2,500 U / $2.50) additional units were used, the actual total quantity must have been 25,000 units (24,000 standard + 1,000).
