Hamrick Company employs a standard cost system in which direct materials inventory is carried at standard cost. The company has established the following standard for the materials costs of one unit of product: Standard Standard Standard Quantity 6.0 pounds S 7.00/pound Price Cost $42.00 During June, the company purchased 160,000 pounds of direct material at a total cost of $1,171,500. The company manufactured 25,000 units of product during June using 150,000 pounds of direct materials.
Hamrick Company employs a standard cost system in which direct materials inventory is carried at standard cost. The company has established the following standard for the materials costs of one unit of product: Standard Standard Standard Quantity 6.0 pounds S 7.00/pound Price Cost $42.00 During June, the company purchased 160,000 pounds of direct material at a total cost of $1,171,500. The company manufactured 25,000 units of product during June using 150,000 pounds of direct materials.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Question
100%
Compute for the variances of the problem using the information given.
Answer the numbers only up to two decimal places.
A. Compute for Direct Materials Spending Variance
B. Compute for Direct Materials Price Variance
C. Compute for Direct Materials Quantity Variance
Transcribed Image Text:Problem 1:
Hamrick Company employs a standard cost system in which direct materials inventory is carried at
standard cost. The company has established the following standard for the materials costs of one unit of
product:
Standard
Price
S 7.00/pound
Standard
Standard
Quantity
6.0 pounds
Cost
$42.00
During June, the company purchased 160,000 pounds of direct material at a total cost of $1,171,500. The
company
manufactured 25,000 units of product during June using 150,000 pounds of direct materials.
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