Epley Corporation makes a product with the following standard costs: In July the company produced 3,300 units using 12,240 pounds of the direct material and 2,760 direct labor-hours. During the month, the company purchased 13,000 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $51,612 and the actual variable overhead cost was $20,148. 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 July is:
A)$2,070 F
B)$2,070 U
C)$1,863 F
D)$1,863 U

Question

Epley Corporation makes a product with the following standard costs:  In July the company produced 3,300 units using 12,240 pounds of the direct material and 2,760 direct labor-hours. During the month, the company purchased 13,000 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $51,612 and the actual variable overhead cost was $20,148. 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 July is:
A)$2,070 F 
B)$2,070 U 
C)$1,863 F 
D)$1,863 U

Quizplus · Accepted Answer

Materials quantity variance = (Standard quantity - Actual quantity) x Standard price
Standard quantity = 3,300 units x 3.7 pounds per unit = 12,210 pounds
Actual quantity = 12,240 pounds
Standard price = $2.70 per pound

Materials quantity variance = (12,210 - 12,240) x $2.70 = $81 U
Since we used more material than expected, this is an unfavorable variance, so the answer is option B, $2,070 U.

Epley Corporation Makes a Product with the Following Standard Costs