Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (1,000 pounds) has the following standards:

	Standard Quantity		Standard Price
Whole tomatoes	1,700	lbs.	$0.45	per lb.
Vinegar	90	gal.	2.70	per gal.
Corn syrup	8	gal.	10.00	per gal.
Salt	36	lbs.	2.50	per lb.

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch 08-99 were as follows:

1,800 lbs. of tomatoes

86 gal. of vinegar

9 gal. of corn syrup

35 lbs. of salt

a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.

Ingredient	Standard Cost per Batch
Whole tomatoes	$fill in the blank 1
Vinegar	fill in the blank 2
Corn syrup	fill in the blank 3
Salt	fill in the blank 4
Total	$fill in the blank 5
Standard unit materials cost per pound	$fill in the blank 6

b. Determine the direct materials quantity variance for batch 08-99. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Ingredient	Materials Quantity Variance	Favorable/Unfavorable
Whole tomatoes	$fill in the blank 7	FavorableUnfavorableUnfavorable
Vinegar	fill in the blank 9	FavorableUnfavorableFavorable
Corn syrup	fill in the blank 11	FavorableUnfavorableUnfavorable
Salt	fill in the blank 13	FavorableUnfavorableFavorable
Total direct materials quantity variance	$fill in the blank 15	FavorableUnfavorableUnfavorable

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Unfavorable variances can be thought of as increasing costs (a debit). Favorable variances can be thought of as decreasing costs (a credit).

The direct material cost variance is the difference between the actual and standard material cost.

Remember the process discussed in chapter for calculating standard cost.