Question
Earlenes Eyewear manufactures eyeglass frames. The company uses a standard cost system. Earlene has set the following standards for frame model 19841. Direct Material 4.5
Earlenes Eyewear manufactures eyeglass frames. The company uses a standard cost system. Earlene has set the following standards for frame model 19841.
Direct Material 4.5 oz. plastic per frame at $3.65 per oz. $16.425 per frame
Direct Labor .8 hours at $28 per hour $22.40 per frame
In April, Earlenes made 2,500 frames with a material cost of $48,000. Earlenes Eyewear purchased 12,000 oz. of plastic but only used 10,000 oz. of plastic for frame 19841.
What is the Material Price Variance?
Which of the following could explain the material price variance calculated above?
a. Earlenes Eyewear paid less per oz because the material was purchased in bulk to receive a discount.
b. Earlenes Eyewear earned less per frame because more materials were purchased than used.
c. Earlenes Eyewear earned more per frame because there were no machine breakdowns and fewer labor hours were required than planned.
d. Earlenes Eyewear paid more per oz because the company decided to go with a higher quality material.
What is the Material Quantity Variance?
Which of the following could explain the material quantity variance calculated above?
a. Earlenes Eyewear incurred less materials expense because there was very little waste which fell below the standard allowance.
b. Earlenes Eyewear incurred more materials expense because the price for the material rose due to an unexpected price increase across the industry.
c. Earlenes Eyewear incurred less materials expense because there were no machine breakdowns and fewer labor hours were required than planned.
d. Earlenes Eyewear incurred more materials expense because the company decided to go with a higher quality material.
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