Standard Quantity Actual Quantity Actual Quantity Allowed for Actual Output, of Input, of at Standard Price at Standard Price at Actual Price (SQ × SP) (AQ × SP) (AQ × AP) 150,000 pounds* × 160,000 pounds × 170,000 pounds × $8.00 per pound $8.00 per pound $7.50 per pound = $1,200,000 = $1,280,000 = $1,275,000 Materials quantity variance = $80,000 U 170,000 pounds × $8.00 per pound = $1,360,000 Materials variance = $85,000 F *30,000 units × 5 pounds per unit = 150,000 units Alternatively, the variances can be computed using the formulas: Materials quantity variance = SP (AQ SQ) – = $8.00 per pound (160,000 pounds 150,000 pounds) – = $80,000 U Materials variance = AQ (AP SP) – = 170,000 pounds ($7.50 per $8.00 per pound) – = $85,000 F The Foundational 15 (continued) 6., 7., and 8. The direct labor cost included in the flexible budget (SH × SR = $840,000), the labor efficiency variance ($70,000 F), and the labor rate variance ($55,000 U) can be computed using the general model for cost variances as follows: Actual Hours of Input, Actual Hours of Input, Standard Hours Allowed at Standard Rate at Actual Rate for Actual Output, (AH × SR) (AH × AR)
Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) Actual Quantity of Input, at Standard Price (AQ × SP) Actual Quantity of at Actual Price (AQ × AP) 150,000 pounds* × $8.00 per pound = $1,200,000 160,000 pounds × $8.00 per pound = $1,280,000 170,000 pounds × $7.50 per pound = $1,275,000 Materials quantity variance = $80,000 U 170,000 pounds × $8.00 per pound = $1,360,000 Materials variance = $85,000 F *30,000 units × 5 pounds per unit = 150,000 units Alternatively, the variances can be computed using the formulas: Materials quantity variance = SP (AQ – SQ) = $8.00 per pound (160,000 pounds – 150,000 pounds) = $80,000 U Materials variance = AQ (AP – SP) = 170,000 pounds ($7.50 per – $8.00 per pound) = $85,000 F The Foundational 15 (continued) 6., 7., and 8. The direct labor cost included in the flexible budget (SH × SR = $840,000), the labor efficiency variance ($70,000 F), and the labor rate variance ($55,000 U) can be computed using the general model for cost variances as follows: Standard Hours Allowed for Actual Output, Actual Hours of Input, at Standard Rate (AH × SR) Actual Hours of Input, at Actual Rate (AH × AR)
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