The Following Standards Have Been Established for a Raw Material

question 74

Essay

The following standards have been established for a raw material used to make product JN36:
$\begin{array}{ll} \text {Standard quantity of material per unit of output } & \text { 6.3pounds } \\ \text { Standard price of the material} & \text { \$15.50 per pound } \\\end{array}$

The following data pertain to a recent month's operations:
$$\begin{array} { l l } \text { Actual material purchased } & 6,700 \text { pounds } \\\text { Actual cost of material purchased } & \$ 100,500 \\\text { Actual material used in production } & 6,400 \text { pounds } \\\text { Actual output } & 920 \text { mits of product JN36 }\end{array}$$
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?

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Definitions:

Output

The quantity of goods or services produced by a firm, industry, or economic system.

Diminishing

A principle often observed in economics where additional units of a variable factor increase total output at a decreasing rate.

Positive Constants

Fixed values greater than zero that appear consistently within a mathematical equation or expression.

Isoquant Slope

The slope of an isoquant curve represents the rate at which one input can be substituted for another while maintaining the same level of output in production theory.