Accelerator, Inc. manufactures a fuel additive called surge. The company produce
ID: 2567379 • Letter: A
Question
Accelerator, Inc. manufactures a fuel additive called surge. The company produces and sells 87,000 containers of surge each month. The company has established the following standards for each container of surge produced: standard quantity standard price direct materials 7 gallons $4.00 per gallon direct labor 2.50 hours $14.00 per hour The following information is available for surge for the month of May: 1. 650,000 gallons of chemicals were purchased at a cost of $2,522,000. At May 31, Accelerator, Inc. had 30,000 gallons of chemical available in the storeroom. 2. 215,000 direct labor hours were worked during May at a total cost of $3,096,000. Calculate the direct material quantity variance for May. If the variance is unfavorable, enter a U after your number with a space between the number and the U (i.e., 10,000 U). If the variance is favorable, enter an F after your number with a space between the number and the F (i.e., 10,000 F)
Explanation / Answer
Actual quantity used
=Beginning Inventory +Qty purchased –Ending Inventory
=0+650,000-30,000
=620,000 gallons
Standard rate=$4.00 per gallon
Standard quantity allowed=7 gallons per unit x 87,000 units=609,000 gallons
Standard rate=
Direct materials quantity variance
= (Actual quantity used × Standard rate) – (Standard quantity allowed × Standard rate)
=(620,000 x $4.00) –(609,000 x $4.00)
=11,000 x $4.00
Direct materials quantity variance=44,000 F