[lbslo7]

I really need help withthis one, I have literally tried everything and still am unable to get the answer correct:

The standard cost of Product B manufactured by Mateo Company includes 3 units of direct materials at $6.25 per unit. During June, 28,000 units of direct materials are purchased at a cost of $5.88 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B.

Repeat (a), assuming the purchase price is $6.50 and the quantity purchased and used is 26,200 units.

So far I have only been able to get the Material Price Variances:
(a) 10360 F

and

(b) 6550 U


I think where Im stuck is getting the correct "standard quantity" to plug into the equations.
I keep getting 27000 as the quantity but every number I have tried, including this number turns out incorrect :(

[morgaine300]

The 27,000 is correct. Standard quantity is usually what trips up most people. The standard quantity is the standard quanity PER UNIT times the ACTUAL units produced. 9000 units x 3 standard = 27,000.

But I don't know what you're doing with it once you've got that.

(Standard Price x Actual Quantity)
(Standard Price x Standard Quantity)

Difference is the quantity variance. I'm coming up with 6250U.

[lbslo7]

Ok, so basically, (1) I have to find the total materials variance (TMV) and the Materials Quantity variance (MQV). (2) I have to do the same but assuming the purchase price is $6.50 and the quantity purchased and used is 26,200 units.

So when I was doing the TMV, I did:
TMV= (28000*6.25)-(27000*5.88)
and came up with 16240 F
Tried many different numbers as well (changing around the 6.25 & 5.88,etc) but nothing is working :(

MQV.. tried numerous things and nothing worked either.

[morgaine300]

Notice the two multiplications I wrote out say "standard price." That isn't what you did. You can never have both quantity and price different. (Except for the overall variance, except that still isn't correct. Overall variance is the difference between everything standard and everything actual.)

The whole point is to find what part of the overall variance is due to quantity differences and what part is due to price differences. So you have to do one set with a change in price only so that you know where the price difference is. That means quantity has to stay the same for that to work. (That's the one you already did. Notice how you did it - you only used a price difference.)

To get a quantity variance, you can change the quantity only. The price has to remain the same.

Otherwise, you're mixing price and quantity instead of separating them out, which is the point of the thing.

Look at what I gave you again:
Standard Price x Standard Quantity
Standard Price x Actual Quantity

Notice only quantity changes. The price has to remain constant, at standard. You didn't follow the instruction I gave.

[lbslo7]

Yeah, I realized that and finally got the answers, thank you for your help.

[morgaine300]

You're welcome. :-)

[rehmanvohra]

Materials price variance = Actual quantity x (Standard price - Actual price)
28000 x (6.25 - 5.88) = 10,360 (F)

Materials Usage variance = (Standard quantity allowed - Actual quantity used) x Standard price
Since 9000 units were produced, the standard quamtity allowed is 9000 x 3 = 27,000
27000 - 28000 x 6.25 = 6,250 (U)