eBook Show Me How Question Content Area Standard Product Cost, Direct Materials Variance H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (1,700 pounds) has the following standards: Ingredient Standard Quantity Standard Price Whole tomatoes 2,800 lbs. $0.41 per lb. Vinegar 160 gal. 2.50 per gal. Corn syrup 14 gal. 9.10 per gal. Salt 64 lbs. 2.30 per lb. The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch 08-99 were as follows: 2,900 lbs. of tomatoes 154 gal. of vinegar 15 gal. of corn syrup 63 lbs. of salt a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent. Ingredient Standard Cost per Batch Whole tomatoes $fill in the blank 1 Vinegar fill in the blank 2 Corn syrup fill in the blank 3 Salt fill in the blank 4 Total $fill in the blank 5 Standard unit materials cost per pound $fill in the blank 6 b. Determine the direct materials quantity variance for batch 08-99. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Ingredient Materials Quantity Variance Favorable/Unfavorable Whole tomatoes $fill in the blank 7 Vinegar fill in the blank 9 Corn syrup fill in the blank 11 Salt fill in the blank 13 Total direct materials quantity variance $fill in the blank 15
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.
Question Content Area
H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (1,700 pounds) has the following standards:
| Ingredient | Standard Quantity | Standard Price |
|---|---|---|
| Whole tomatoes | 2,800 lbs. | $0.41 per lb. |
| Vinegar | 160 gal. | 2.50 per gal. |
| Corn syrup | 14 gal. | 9.10 per gal. |
| Salt | 64 lbs. | 2.30 per lb. |
The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch 08-99 were as follows:
2,900 lbs. of tomatoes
154 gal. of vinegar
15 gal. of corn syrup
63 lbs. of salt
a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.
Ingredient |
Standard Cost per Batch |
|---|---|
| Whole tomatoes | $fill in the blank 1 |
| Vinegar | fill in the blank 2 |
| Corn syrup | fill in the blank 3 |
| Salt | fill in the blank 4 |
| Total | $fill in the blank 5 |
| Standard unit materials cost per pound | $fill in the blank 6 |
b. Determine the direct materials quantity variance for batch 08-99. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Ingredient |
Materials Quantity Variance |
Favorable/Unfavorable |
|---|---|---|
| Whole tomatoes | $fill in the blank 7 |
|
| Vinegar | fill in the blank 9 |
|
| Corn syrup | fill in the blank 11 |
|
| Salt | fill in the blank 13 |
|
| Total direct materials quantity variance | $fill in the blank 15 |
|
Variance analysis is one of the technique used in management accounting. Under this, all standard costs are compared with actual costs and on that basis, deviations and differences are calculated and then corrective actions are taken.
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