Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company
ID: 2428383 • Letter: C
Question
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds
12. The materials quantity variance for January is
A. $300 F. B. $750 F. C. $300 U. D. $800 U.
Explanation / Answer
The materials quantity variance is calculated as follows; AQ X SP - SQ X SP (abbreviations refer to Actual and Standard Quantities and Prices) AQ = Beginning inventory + Purchased Materials - Ending Inventory AQ = 0 lbs + 85,000 lbs - 3,000 lbs = 82,000 lbs SP = $8.00 per bag / 20 lbs per bag = $0.40 per pound SQ = 20 lbs per bag x 4,000 bags = 80,000 lbs (82,000 lbs) x ($0.40 per pound) - (80,000 lbs) x ($0.40 per pound) = $800 Because we used more pounds of direct materials than we were supposed to, the variance is unfavorable. Please rate.