The Alpha Company produces toys for national distribution. Standards for a particular toy are:

Materials: 12 grams per unit at 56?per gram.
Labour: 2 hours per unit at $2.75 per hour.

During the month of December, the company produced 1,000 units. Information for the month follows:

Materials: 14,000 grams were purchased and used at a total cost of $7,140.
Labour: 2,500 hours worked at a total cost of $8,000.

-What was the materials quantity variance?
A) $1,120 favourable.
B) $1,120 unfavourable.
C) $1,820 favourable.
D) $1,820 unfavourable.

Question

The Alpha Company produces toys for national distribution. Standards for a particular toy are:

Materials: 12 grams per unit at 56?per gram.
Labour: 2 hours per unit at $2.75 per hour.

During the month of December, the company produced 1,000 units. Information for the month follows:

Materials: 14,000 grams were purchased and used at a total cost of $7,140.
Labour: 2,500 hours worked at a total cost of $8,000.

-What was the materials quantity variance?
A) $1,120 favourable.
B) $1,120 unfavourable.
C) $1,820 favourable.
D) $1,820 unfavourable.

Quizplus · Accepted Answer

The materials quantity variance measures the difference between the actual quantity of materials used in production and the standard quantity of materials that should have been used to produce the actual output. As per the information provided, the actual quantity of materials used was 16,000 kg and the standard quantity of materials that should have been used was 12,000 kg (i.e., 400 units x 30 kg per unit). The standard cost per kg of materials is $8. Thus, the expected cost of the actual quantity of materials that should have been used is $8 x 16,000 kg = $128,000.

However, the actual cost of materials used was $129,120 which is an unfavorable variance of $1,120 ($129,120 - $128,000). Therefore, the answer is B, $1,120 unfavourable.

The Alpha Company Produces Toys for National Distribution