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Total Materials VarianceYoung Inc. produces plastic bottles. Production of 16-ounce bottles has a standard unit quantity of 0.45 ounce of plastic per bottle. During the month of June, 240,000 bottles were produced using 110,000 ounces of plastic. The actual cost of plastic was $0.042 per ounce, and the standard price was $0.045 per ounce. There is no beginning or ending inventories of plastic.


Calculate the materials price and usage variances using the columnar and formula approaches.

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Answer:

Price variance = $330 Favorable                            

Usage variance = $90 Unfavorable

Explanation:

Formula approach

Material price variance

$(0.045-0.042)×  110,000  = $330 Favorable

Material Usage Variance

(110,000)-(0.45×240,000) × 0.045 =    $90 unfavorable

Columnar Approach

Price variance                                      $

Standard cost (0.045 × 110,000 )  =  4950

Actual cost  (0.042 × 110,000 )    =   4620

Variance                                                330 Favorable

Usage Variance

                                                                    Ounce

Standard quantity     (0.45×240,000) =   108000

Actual quantity                                          110,000

  Variance in ounce                                    2000 unfavourable

× Standard price                                        0.045      

Variance                                                       $90 Unfavorable

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