Standard Product Cost, Direct Materials Variance Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,400 pounds) has the following standards: Standard Quantity Standard Price Whole tomatoes 4,000 lbs. $ 0.36 per lb. Vinegar 220 gal. $ 2.20 per gal. Corn syrup 19 gal. $ 8.00 per gal. Salt 88 lbs. $ 2.00 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: 4,200 lbs. of tomatoes 211 gal. of vinegar 20 gal. of corn syrup 87 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 K-111. 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 $72.00 Unfavorable Vinegar $ fill in the blank 8 Favorable Corn syrup $8.00 Unfavorable Salt $ fill in the blank 10 Favorable Total direct materials quantity variance $58.20 Unfavorable Feedback Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit). The direct material cost variance is the difference between the actual and standard material cost. Remember the process discussed in chapter for calculating standard cost. Learning Objective 2, Learning Objective 3.
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
Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,400 pounds) has the following standards:
| Standard Quantity | Standard Price | |||
| Whole tomatoes | 4,000 | lbs. | $ 0.36 | per lb. |
| Vinegar | 220 | gal. | $ 2.20 | per gal. |
| Corn syrup | 19 | gal. | $ 8.00 | per gal. |
| Salt | 88 | lbs. | $ 2.00 | 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:
| 4,200 lbs. of tomatoes |
| 211 gal. of vinegar |
| 20 gal. of corn syrup |
| 87 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 K-111. 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 | $72.00 | Unfavorable |
| Vinegar | $ fill in the blank 8 | Favorable |
| Corn syrup | $8.00 | Unfavorable |
| Salt | $ fill in the blank 10 | Favorable |
| Total direct materials quantity variance | $58.20 | Unfavorable |
Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit).
The direct material cost variance is the difference between the actual and standard material cost.
Remember the process discussed in chapter for calculating standard cost.
Learning Objective 2, Learning Objective 3.
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