Materials Variances Lata Inc., produces aluminum cans. Production of 14-ounce ca

Question

Materials Variances

Lata Inc., produces aluminum cans. Production of 14-ounce cans has a standard unit quantity of 4.4 ounces of aluminum per can. During the month of April, 299,000 cans were produced using 1,253,000 ounces of aluminum. The actual cost of aluminum was $0.19 per ounce and the standard price was $0.09 per ounce. There are no beginning or ending inventories of aluminum.

Required:

Calculate the materials price and usage variances using the columnar and formula approaches.

Explanation / Answer

Materials Price Variance=AQ(SP-AP)=1,253,000($0.09-$0.19)=1,253,000($0.10)=-$125,300-U

Material Usage Variance=SP(SQ-AQ)=$0.09(299,000*4.4 Ounces-1,253,000 ounces)

=$0.09(1,315,600-1,253,000)=$0.09*62,600=$5,634-F

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