Question
Clark Products manufactures faux boulders to be used in various landscaping applications. A special resin is used to make the boulders. The standard quantity
Clark Products manufactures faux boulders to be used in various landscaping applications. A special resin is used to make the boulders. The standard quantity of resin used for each boulder is 6 pounds. Clark Products uses a standard cost of $1.70 per pound for the resin. The company produced 2,750 boulders in June. In that month, 16,000 pounds of resin were purchased at a total cost of $28,000. A total of 15,750 pounds were used in producing the boulders in June. Read the requirements. Requirement 1. Calculate the direct material price variance. Begin by determining the formula for the price variance, then compute the price variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials) Actual quantity purchased * ( 16,000 ($ Actual price 1.75 Standard price 1.70 ) = DM price variance ) = $ 800 U Requirement 2. Calculate the direct material quantity variance. Determine the formula for the quantity variance, then compute the quantity variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U).) Standard price Actual quantity used 1.70 *( 15,750 Standard quantity allowed) = 18500 4675 DM quantity variance F
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