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Sonne Company: Material Variance

The Sonne Company produces a perfume called Whim. The direct materials and direct labor standards for one bottle of Whim are given in the attached file in a chart.

During the most recent month, the following activity was recorded:
a. Twenty thousand ounces of material were purchased at a cost of $2.40 per ounce.
b. All of the material was used to produce 2,500 bottles of Whim.
c. Nine hundred hours of direct labor time were recorded at a total labor cost of $10,800.
Required:
1. Compute the direct materials price and quantity variances for the month.
2. Compute the direct labor rate and efficiency variances for the month.

Assume that instead of producing 2,500 bottles of Whim during the month, the company produced only 2,000 bottles using 16,000 ounces of material. (The rest of the material purchased remained in raw materials inventory.)

Task: Compute the direct materials price and quantity variances for the month.

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Solution Preview

1. Compute the direct materials price and quantity variances for the month.
Direct materials price variance = AQ (AP - SP)
= 20,000 ounces($2.40 - $2.5)
= 2,000 F

AQ = actual quantity purchased, AP = actual price/yard, SP = standard price/yard
Direct materials quantity variance = SP (AQ - SQ)
...

$2.19