Accounting Capstone - Budget Performace Variance Report Direct MaterialsUnder normal conditions, Sarah spends $8.40 per unit of materials, and it will take 3.60 units of material per pair of shoes. During July, Sole Purpose Shoe Company incurred actual direct materials costs of $62,211for 6,990 units of direct materials in the production of 2,150 pairs of shoes.Complete the following table, showing the direct materials variance relationships for July for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use anegative number for a favorable cost variance, and a positive number for an unfavorable cost variance.Actual CostActualQuantityXXActualPriceDirect MaterialsVariance:ActualQuantity=XXTotal Direct MaterialsVariance:StandardPriceDirect MaterialsVariance:StandardQuantity StandardQuantityStandard CostII$XXtAStandardPrice

Name: Accounting Capstone - Budget Performace Variance Report Direct Materia
Uploaded: 2024-03-20T06:33:06.000Z
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Description: Accounting Capstone - Budget Performace Variance Report Direct MaterialsUnder normal conditions, Sarah spends $8.40 per unit of materials, and it will take 3.60 units of material per pair of shoes. During July, Sole Purpose Shoe Company incurred actu

Material cost variance: Material cost variance is the difference between standard cost of material specified for the output achieved and the actual cost of material used. Material cost variance is further divided into two such as ; 1.) Material price variance 2) Material quantity(usage ) variance 1.) Material price variance : It is that part of material cost variance which is due to the difference between standard price and actual price paid. 2.) Material quantity(usage ) variance: It is that part of material cost variance which is due to the difference between standard quantity and actual quantity used. Material cost variance = Material price variance +Material quantity varianceGiven information: Actual cost of material used =$ 62,211 Actual quantity of material used = 6,990 units Actual production = 2,150 pair of shoes. Standard price per unit =$ 8.40 Standard quantity of materials for making one pair of shoe = 3 .60 Working note: Standard quantity of materials required for actual production (2,150 units) =( 3.60 x 2,150) Standard quantity of materials required for actual production (2,150 units) = 7,740 units Actual price per unit of material = (Actual cost incurred for actual quantity of materials / Actual quantity of material used) Actual price per unit of material = $ 62,211 / 6,990 Actual price per unit of material = $ 8.90 1.Calculation of material cost variance: Material cost variance = Standard cost of material -Actual cost of material Standard cost of material = Standard quantity X Standard price per unit Actual cost of material = Actual quantity X Actual price per unit Material cost variance =(Standard quantity x Standard price) -( Actual quantity x Actual price)Material cost variance =(7,740 x $ 8.40) - (6,990 x $ 8.90)Material cost variance = $ 65,016 -$ 62,211Material cost variance =$ 2,805 Favorable Calculation of Material price variance : Material price variance = Actual quantity x ( Standard price - Actual price) Material price variance = 6,990 x( $ 8.40 -$ 8.90)Material price variance =$ 3,495 Unfavorable Calculation of Material quantity variance: Material quantity variance = Standard price x ( Standard quantity - Actual quantity) Material quantity variance = $ 8.40 ( 7,740 -6,990)Material quantity variance =$ 6,300 Favorable Material cost variance = Material Price variance +Material quantity variance $ 2,805 = - $ 3,495 + $ 6,300 $ 2,805 = $ 2,805 CONCLUSION: Therefore we can prove that : Direct material cost variance = Direct material price variance +Direct material quantity variance $ 2,805 (Favorable) Total material cost variance = $ 3,495( Unfavorable) Material price variance +$ 6,300( Favorable) Material quantity variance