Question

doogan corporation makes a product with the following standard costs:

direct materials: standard quantity or hours 2.0 grams, standard price or rate $ 7.00 per gram
direct labor: standard quantity or hours 1.0 hours, standard price or rate $ 14.00 per hour
variable overhead: standard quantity or hours 1.0 hours, standard price or rate $ 6.00 per hour

the company produced 4,700 units in january using 10,280 grams of direct material and 2,260 direct labor-hours. during the month, the company purchased 10,850 grams of the direct material at $7.30 per gram. the actual direct labor rate was $14.55 per hour and the actual variable overhead rate was $5.80 per hour.

the company applies variable overhead on the basis of direct labor-hours. the direct materials price variance is computed when the materials are purchased.

the materials quantity variance for january is:

multiple choice

$6,424 f

$6,960 u

$6,424 u

$6,960 f

Explanation:

Step1: Calculate standard quantity

Standard quantity = Units produced × Standard quantity per unit
Standard quantity = \(4700\times2.0 = 9400\) grams

Step2: Calculate materials quantity variance

Materials quantity variance formula: \( (AQ - SQ)\times SP\)
Where \(AQ = 10280\) grams (actual quantity used), \(SQ=9400\) grams (standard quantity), \(SP = 7.00\) (standard price per gram)
\((10280 - 9400)\times7\)
\(=880\times7\)
\(=6160\)
Since actual quantity \(AQ\) is greater than standard quantity \(SQ\), the variance is unfavorable (\(U\))

Answer:

\( \$6160\ U\)