# Crede Manufacturing: Price and quantity variances

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Crede Manufacturing uses standard cost accounting. In 2005, 33000 units were produced. Each unit took several pounds of direct materials and 1 1/3 standard hours of direct labor at a standart hourly rate of $12.00. Normal capacity was 42,000 direct labor hours. During the year 132,000 pounds of raw materials were purchased at $0.90 per pound. All pounds purchased were used during the year.

a. If materials price variance was $3960 unfavorable, what was the standard materials price per pound?

b. If the materials quantity variance was $2,871 favorable, what was the standard materials quantity per unit?

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Please see the attached file.

a) Material Price Variance = Actual Quantity*(Actual Price - standard Price)

We have

3960 = 132000*($0.90-standard Price)

Solving we get standard price = 0.90-3960/132000 = $0.87

b) Material Quantity Variance = Standard Price*(Actual quantity - standard quantity)

We have -2871 = 0.87*(132000 - 33000*standard material quantity per unit)

Solving we get

standard material quantity per unit = (132000+2871/0.87)/33000 = 4.1 pounds

c) Standard Hours Allowed ...

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