Materials Variances Assume that Pearle Vision uses standard costs to control the
ID: 2340201 • Letter: M
Question
Materials Variances
Assume that Pearle Vision uses standard costs to control the materials in its made-to-order sunglasses. The standards call for 2 ounces of material for each pair of lenses. The standard cost per ounce of material is $17.00. During July, the Santa Clara location produced 5,200 pairs of sunglasses and used 9,900 ounces of materials. The cost of the materials during July was $17.25 per ounce, and there were no beginning or ending inventories.
Required
a. Determine the flexible budget materials cost for the completion of the 5,200 pairs of glasses.
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b. Determine the actual materials cost incurred for the completion of the 5,200 pairs of glasses and compute the total materials variance.
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c. How much of the total variance was related to the price paid to purchase the materials?
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d. How much of the difference between the answers to requirements (a) and (b) was related to the quantity of materials used?
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Explanation / Answer
a) Flexible budget material cost = 5200*2*17 = $176800
b) Actual material cost incurred = 9900*17.25 = $170775
Total material variance = 176800-170775 = 6025 F
c) Material price variance = (17-17.25)*9900 = 2475 U
d) Material used variance = 6025+2475 = 8500 F