Cleveland Chemical Company manufactures a product called Kylon, which requires three raw materials. Production is in batches of 1,000 gallons of finished product. The firm uses standard costs as a control device. Its standard costs for materials for each batch of Kylon have been established as follows:

The output is packaged in 50-gallon drums. During the month of June 2016, 200 drums of Kylon were produced. There was no beginning or ending inventory of work in process. The materials actually used during June are listed below:
Material Quantity Cost per Gallon
Starter............7,070 gal..........$ 1.10
Acid..............2,140 gal............3.30
Activator..........630 gal...........32.50
INSTRUCTIONS
1. Compute the total variance between the actual cost of the materials used during June and the standard cost of the materials. Also compute the total variance for each type of material.
2. Analyze the variances for each type of material for the month.
Analyze:
Which raw materials were obtained at a price that was lower than standard cost?

Transcribed Image Text:

Standard Cost per Gallon S 1.20 3.00 25.00 $29.20 Standard Cost per Batch S 840.00 630.00 2,250.00 3,720.00 Material Quantity Starter Acid Activator Total standard cost 700 gal 210 gal. 90