Question

Young Inc. produces plastic bottles. Production of 16-ounce bottles has a standard unit quantity of 0.45 ounce of plastic per bottle. During the month of June, 240,000 bottles were produced using 110,000 ounces of plastic. The actual cost of plastic was $0.042 per ounce, and the standard price was $0.045 per ounce. There is no beginning or ending inventories of plastic.
Required:1. Calculate the materials price and usage variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable.

Answer 1

Answer:

Materials Price Variance = ( Actual Quantity * Actual Price ) - (Actual Quantity * Standard Price )

= ( 110,000 * $ 0.042) - (110,000 * $ 0.045)

= $ 330 Favorable

Material Usage Variance = Standard Price * ( Standard Quantity - Actual Quantity)

= $ 0.045 * ( 108,000 - 110,000)

= $ 90 Unfavorable

Note :

Standard Quantity = Number of Bottles * 0.45 ounce of plastic per bottle

= 240,000 * 0.45

= 108,000 Ounces of Plastic

Explanation:

Answer 2

Answer:

Total Variance =  240 Favorable

Explanation:

Materials Cost Variance = (Actual Amount × Standard Cost ) - (Actual Amount × Actual Cost )

Materials Cost Variance= (110,000 × $0.045) - (110,000 × $0.042)  

Materials Cost Variance= 4950  - 4620

Materials Cost = $330  Favorable

Usage Variance = (Standard Amount- Actual Amount) ×  Standard Cost

Usage Variance = (108,000 - 110,000) ×  $0.045

Usage Variance = $90 Unfavorable

Note :

Standard Amount = Number of Bottles × Standard Unit Quantity  

Standard Amount = 240,000 * 0.45

Standard Amount = 108,000 Ounces of Plastic

Thus,

Total Variance = Materials Cost Variance -  Usage Variance

Total Variance = 330 - 90

Total Variance =  240 Favorable