Wings Ltd, mass produce "suit cases" for travel in a variety of colours, but only...
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Accounting
Wings Ltd, mass produce "suit cases" for travel in a variety of colours, but only in one design. The following information had been extracted from the company's standard cost sheet for the month of March based on the production of 18,000 cases.
Plastic
10 metres at $4.50 per metre
Leather
3 metres at $3.00 per metre
Actual costs incurred during the month of March were:
Purchased 185,000 metres of plastic at $4.45 per metre
Purchased 50,000 metres of leather at $3.10 per metre
Used 175,000 metres of plastic at $4.45 per metre
Used 48,000 metres of leather at $3.10 per metre
Based on the purchased quantity, determine the direct material price variance of both materials (plastic and leather) in making the cases. See formulas below:
Standard Costs Formulas as per your prescribed text book
PQ Purchased Quantity; AP Actual Price; SP Standard Price; AQ Actual Quantity; SQ Standard Quantity; AR Actual Rate; SR Standard Rate; AH Actual Hours; SH Standard Hours
Material Variances
Direct Material Price Variance (based on purchased quantity)= PQ(AP SP) / (PQ x AP)(PQ x SP)
Direct Material Quantity Variance = SP(AQ SQ) / (AQ x SP) (SQ x SP)
Total Material Variance = Price + Quantity from above
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