Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
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Question
Chapter IE, Problem 1IE
To determine
To calculate: The spending variance for June
Expert Solution
Answer to Problem 1IE
Solution: The spending variance for June is $8 Favorable
Explanation of Solution
The spending variance for June is calculated as follows:
Actual Cost per unit (A) (2632/1100) | $ 2.3927 | |
2.4 | ||
Actual Units (C) | 1100 | |
Spending Variance (A-B)*C = | $ 8 | Favorable |
Conclusion
The spending variance for June is $8 Favorable
Requirement-3:
To determine
To calculate: The material price, quantity and spending variances
Expert Solution
Answer to Problem 1IE
Solution: The material price, quantity and spending variances are as follows:
Direct Material Price Variance | $ 188 | Favorable |
Direct Material Quantity Variance | $ 180 | Unfavorable |
Material Spending Variance | $ 8 | Favorable |
Explanation of Solution
The material price, quantity and spending variances are calculated as follows:
Material Price Variance: | ||
Actual Price (A) (2632/9400) | $ 0.28 | Per Ounce |
Standard Price (B) | $ 0.30 | Per Ounce |
Actual Quantity (C) | 9400 | Pounds |
Material Price Variance = (A-B)*C = | $ 188 | Favorable |
Material Quantity Variance: | ||
Actual Quantity (A) | 9400 | Ounces |
Standard Quantity (B) (1100 units *8 ounces) | 8800 | Ounces |
Standard Price (C) | $ 0.30 | Per Ounce |
Material Quantity Variance = (A-B)*C = | $ 180 | Unfavorable |
Material Spending Variance (188-180) | $ 8 | Favorable |
Conclusion
Hence material spending variance is the sum of Material Quantity Variance and Material Quantity Variance.
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY