Mystic Falls Inc.
Mystic Falls Inc. bottles and sells a popular soft drink. In 2009, the company had expected to sell 1 000 000 bottles but actually bottled and sold 900 000 bottles. The standard direct materials cost for each bottle is $.40 comprised of 10 grams at a cost of $.04 per gram. During 2009, 10 000 000 grams of material were purchased out of which 9 200 000 grams were used at a cost of $.05 per gram.
-The direct materials usage variance for 2009 was:
A) $ 8000 U
B) $ 8000 F
C) $40 000 U
D) $40 000 F

Question

Quizplus · Accepted Answer

The direct materials usage variance is calculated as (Actual Quantity Used - Standard Quantity Allowed) x Standard Cost per Unit. The standard quantity allowed for 900,000 bottles is 9,000,000 grams (900,000 bottles x 10 grams per bottle). The actual quantity used is 9,200,000 grams. Therefore, the variance is (9,200,000 - 9,000,000) x $0.04 = 200,000 x $0.04 = $8,000 Unfavorable, because more materials were used than the standard allowed.

Mystic Falls Inc. Mystic Falls Inc. Bottles and Sells a Popular Soft Drink