The Dexon Company makes and sells a single product, called a Mip, and employs a standard costing system. The following standards have been established for one unit of Mip:$\begin{array}{|l|r|r|}
\hline & \text { Standard Quantity or Hours } & \text { Standard Cost per Mip } \
\hline \text { Direct Materials } & 6 \text { board metre } & \$ 9.00 \
\hline \text { Direct Labour } & 0.8 \text { hours } & \$ 9.60 \
\hline
\end{array}$
There were no inventories of any kind on August 1. During August, the following events occurred:
Purchased 15,000 board metres at the total cost of $\$ 24,000$.
Used 12,000 board metres to produce 2,100 Mips.
Used 1,700 hours of direct labour time at a total cost of $\$ 20,060$.
- To record the use of direct materials in production,the general ledger would include what entry to the Materials Quantity Variance account?
A) $900 debit.
B) $900 credit.
C) $3,600 debit.
D) $3,600 credit.

Question

Quizplus · Accepted Answer

The Materials Quantity Variance is calculated as (Actual Quantity - Standard Quantity) * Standard Cost per Unit. For direct materials, the standard quantity for 2,100 Mips is 2,100 Mips * 6 board metres/Mip = 12,600 board metres. The actual quantity used is 12,000 board metres. Therefore, the variance is (12,000 - 12,600) * $1.50/board metre = -600 * $1.50 = -$900. A negative variance indicates a favorable outcome, hence it is credited.

The Dexon Company Makes and Sells a Single Product, Called