Parsons and Company has established the following direct material standards for
ID: 2380385 • Letter: P
Question
Parsons and Company has established the following direct material standards for its product, the Magnificent Switchmaster.
Standard costs for one unit of output:
Material A, 25 units of input @ $40 per unit.
Material B, 75 units of input @ $150 per unit.
During October, the company had the following results:
Magnificent Switchmasters produced
Parsons and Company has established the following direct material standards for its product, the Magnificent Switchmaster. Standard costs for one unit of output: Material A, 25 units of input @ $40 per unit. Material B, 75 units of input @ $150 per unit. During October, the company had the following results: Magnificent Switchmasters produced.................................3,000 units Materials purchased and used: Material A.......................................................79,000 units @ $37. Material B.......................................................231,000 units @ $155. Required: Compute the direct-material price and quantity variances. Direct material price variance_______________________________________________ Direct material quantity variance_____________________________________________ Total material variance_____________________________________________________Explanation / Answer
for A
Direct material price variance(a)=79000*37-79000*40-=-$237000
Direct material quantity variance(b)=(79000-(25*3000))*40=$160000
Total material variance=a+b=-$87000
for B
Direct material price variance(a)=231000*155-231000*150=$1155000
Direct material quantity variance(b)=(231000-(75*3000))*150=$900000
Total material variance=a+b=$2055000