Week 7, LO 2 Demo

Week 7, LO 2 Demo - Problem Using the general models...

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Week 7: Standard Costs Week 7 Skill Building Demonstration Problem 2 Compute the direct materials price and quantity variances and explain their significance . Learning Objective 2 Given: Glacier Park Outfitters has the following direct material standards for the fiberfill in its mountain parka: 0.1 kg of fiberfill per parka at $5.00 per kg. Last month, 210 kgs of fiberfill were purchased and used to make 2,000 parkas. The material cost a total of $1,029. Compute the direct materials price and quantity variances and explain their significance.
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Unformatted text preview: Problem Using the general models : Significance: The $21 favorable price variance means that the company was able to purchase direct materials at less than the standard cost savings of $21. The unfavorable quantity variance of $50 means that the company used 10 KGs more materials than required for the level of output (2000 parkas). Total Variance is $29 unfavorable ( $21+(50)) means that the company spent $29 more than the standard cost to make the $2000 parkas. Solution...
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Week 7, LO 2 Demo - Problem Using the general models...

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