Consider the following data for Martin Manufacturing during the month of November: Standard: 5 pounds of direct materials are required per unit at $3.20 per pound Actual: 104,000 pounds were used to produce 20,000 units; actual materials cost was $3.15 per pound (1) Material Price Variance (MPV) - Using the above data from Martin Manufacturing, calculate the direct materials price variance and show your calculation. Is the materials price variance favorable or unfavorable? (2) Material Quantity Variance (MQV) - Using the data above from Martin Manufacturing, calculate the direct materials quantity variance and show your calculation. Is the materials quantity variance favorable or unfavorable? (3) Total Materials Variance – Calculate the total material variance and please show your work.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Consider the following data for Martin Manufacturing during the month of November:
Standard: 5 pounds of direct materials are required per unit at $3.20 per pound
Actual: 104,000 pounds were used to produce 20,000 units; actual materials cost was
$3.15 per pound
(1) Material Price Variance (MPV) - Using the above data from Martin Manufacturing, calculate the direct materials price variance and show your calculation. Is the materials price variance favorable or unfavorable?
(2) Material Quantity Variance (MQV) - Using the data above from Martin Manufacturing, calculate the direct materials quantity variance and show your calculation. Is the materials quantity variance favorable or unfavorable?
(3) Total Materials Variance – Calculate the total material variance and please show your work.
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