A company manufactures a single product L , for which the standard material cost is as follows.
$ per unit
Material 14 kg x $3 = 42
During July , 800 units of L were manufactured , 12000 kg of material were purchased for $ 33600, of which 11500 kg were issued to production.
SM Co values all inventory at standard cost.
What are the material price and usage variances for July ?
A. $2300 (F) $900 (A)
B $ 2300 (F) $ 300 (A)
C $ 2400 (F) $ 900 (A)
D $ 2400 (F) $ 840 (A)
I am sorry for the typing errors , in advance
Materials Prices variances $900F
Materials usage variances $900A
Material price variance , you must calculate total cost material purchased weather used or not. And for Material usage , u must calculate the material that was actually used while closing inventory must be valued @ standard costs. I hope this helps.
Price variance = $2400Favorable
Qty p x actual cost = $33600
Qty p x Sp= 12000kg x $3= $36000
For material usuage = $900Adverse
Qty used x SP = 11500kg x $3=$ 34500
SQ for the actual production x Sp=800u x14kg x $3=$33600
Value the inventory to be $1500.
Answer should be (C)