Posted: May 3rd, 2016

What is the materials quantity variance?

Fruit Snacks Corp Inc. makes lunchbox style fruit snacks. The owner of the company is setting up a standard cost system, and she collected the following data for one of the company’s products – fruit chews.

The data below pertain only to the fruits used in the product.

Material requirements, kilograms of fruit per dozen bags 0.95 kg
Allowance for waste, kilograms of fruit per dozen bags 0.06 kg
Allowance for rejects, kilograms of fruit per dozen bags 0.04
Purchase price, fruit $7.50/kg
Purchase discount 4% of purchase price
Shipping cost from supplier $0.30/kg
Receiving and handling cost $0.10/kg

Posters Now uses a standard cost system. Job 67 is for the manufacturing of 800 unites of the product P100. The company’s standards for one unit of product P100 are as follows:

Standard quantity: 11 ounces
Standard price: $3 per ounce
Standard direct labour: 1.5 hours
Standard labor rate: $12 per hour

The job required 8,000 ounces of raw material costing ,100.
a) What is the materials variance? Show computations.
b) What is the materials quantity variance? Show computations.