Westonci.ca makes finding answers easy, with a community of experts ready to provide you with the information you seek. Connect with a community of experts ready to provide precise solutions to your questions quickly and accurately. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

ABC Company's production budget for October is based on 500 units. Standard unit cost for raw materials is $130 per unit ($10 per pound x 13 pounds per unit).

ABC's actual production in October= = 525 units.
The actual cost of materials used = $69,300 ($11 per pound x 12 pounds per unit).

Required:
a. Calculate the raw materials price variance for October. Is it favorable or unfavorable?
b. Calculate the raw materials usage variance for October. Is it favorable or unfavorable?


Sagot :

Answer and Explanation:

The computation is shown below;

a. Raw material price variance is

= (standard price - actual price) × actual quantity

= ($10 - $11) × ($69,300 ÷ $11)

= ($10 - $11) × 6,300

= $6,300 unfavorable

b. The raw material usage variance is

= (Standard quantity - actual quantity) × standard price

= (525 × 13 - 6,300) × $10

= $5,250 favorable

In this way it should be calculated