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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Materials Variances

Manzana Company produces apple juice sold in gallons. Recently, the company adopted the following material standard for 1 gallon of its apple juice:

Chapter 10, Problem 48E, Materials Variances Manzana Company produces apple juice sold in gallons. Recently, the company

During the first week of operation, the company experienced the following results:

  1. a. Gallon units produced: 20,000.
  2. b. Ounces of materials purchased and used: 2,650,000 ounces at $0.045.
  3. c. No beginning or ending inventories of raw materials.

Required:

  1. 1. Compute the materials price variance.
  2. 2. Compute the materials usage variance.
  3. 3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $20,000 unfavorable. The company purchased and used 2,000,000 ounces of material during this week. How many gallons of juice were produced, and what was the actual price paid per ounce of materials?

1.

To determine

Calculate the value of material price variance.

Explanation

Variance:

The amount obtained when actual cost is deducted from budgeted cost is known as variance. Variance is calculated to find whether the cost is over applied or under applied.

Use the following formula to calculate material price variance:

Material Price Variance=(Actual PriceStandard Price)×Actual Quantity

Substitute $0.045 for actual price, $0.05 for standard price and 2,650,000 for actual quantity in the above formula

2.

To determine

Calculate the value of material usage variance.

3.

To determine

Calculate the quantity of gallons and the actual price of the material.

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