Required: 1. Compute the materials price variance. 2. Compute the materials usage variance. 3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $24,000 unfavorable. The company purchased and used 2,255,000 ounces of material during this week. How many gallons of juice were produced? If required, round your answer to nearest whole value. __________ GALLONS What was the actual price paid per ounce of materials? Round your answer to the nearest cent. ________ PER OUNCE
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.
Materials Variances
Manzana Company produces apple juice sold in gallons. Recently, the company adopted the following material standard for one gallon of its apple juice:
Direct materials 128 oz. @ $0.04 = $5.12
During the first week of operation, the company experienced the following results:
- Gallon units produced: 24,000.
- Ounces of materials purchased and used: 2,710,000 ounces at $0.060.
- No beginning or ending inventories of raw materials.
Required:
1. Compute the materials price variance.
2. Compute the materials usage variance.
3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $24,000 unfavorable. The company purchased and used 2,255,000 ounces of material during this week. How many gallons of juice were produced? If required, round your answer to nearest whole value.
__________ GALLONS
What was the actual price paid per ounce of materials? Round your answer to the nearest cent.
________ PER OUNCE
Note: Enter favorable values as negative numbers. Enter unfavorable values as positive numbers.
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