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# Crede Manufacturing: Price and quantity variances

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?

#### Solution Preview

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 ...

#### Solution Summary

Calculations done step by step for you.

\$2.19