H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (3,128 pounds) has the following standards: Standard Quantity Standard Price Whole tomatoes 4,000 lbs. $ 0.60 per lb. Vinegar 260 gal. 2.25 per gal. Corn syrup 25 gal. 28.00 per gal. Salt 100 lbs. 2.25 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 K-111 were as follows: 4,250 lb. of tomatoes 275 gal. of vinegar 22 gal. of corn syrup 90 lb. of salt a. Determine the standard unit materials cost per pound for a standard batch. Round the per unit answer to the nearest whole cent. b. Determine the direct materials quantity variance for batch K-111. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your answers to the nearest cent.
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.
Standard Product Cost, Direct Materials Variance
H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (3,128 pounds) has the following standards:
Standard Quantity Standard Price
Whole tomatoes 4,000 lbs. $ 0.60 per lb.
Vinegar 260 gal. 2.25 per gal.
Corn syrup 25 gal. 28.00 per gal.
Salt 100 lbs. 2.25 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 K-111 were as follows:
4,250 lb. of tomatoes
275 gal. of vinegar
22 gal. of corn syrup
90 lb. of salt
a. Determine the standard unit materials cost per pound for a standard batch. Round the per unit answer to the nearest whole cent.
b. Determine the direct materials quantity variance for batch K-111. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your answers to the nearest cent.
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