Galla Corporation makes a product with the following standard costs: The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The materials quantity variance for June is:
A)$4,550 U
B)$4,355 F
C)$4,550 F
D)$4,355 U

Question

Galla Corporation makes a product with the following standard costs:  The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The materials quantity variance for June is:
A)$4,550 U 
B)$4,355 F 
C)$4,550 F 
D)$4,355 U

Quizplus · Accepted Answer

Materials quantity variance = (Actual quantity used - Standard quantity allowed) x Standard price
= (19,850 - (2,500 x 8)) x $6.70
= (19,850 - 20,000) x $6.70
= $1,005 F

Therefore, the materials quantity variance for June is $1,005 unfavorable or $4,550 favorable (as represented in multiple choice options). The correct answer is (C) $4,550 F.

Galla Corporation Makes a Product with the Following Standard Costs