1 answer

Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that...

Question:

Squeaky Clean produces commercial strength cleansing supplies. Two of its main products are window cleanser that uses​ ammonia, and floor cleanser that uses bleach. Information for the most recent period​ follows:

Product Names

Window Cleaner​(ammonia)

Floor Cleaner​(bleach)

Direct materials information

Standard ounces per unit

16

oz.

24

oz.

Standard price​ (SP) per ounce

$ 0.25

​?

Actual quantity​ (AQ) used per unit

20

oz.

22

oz.

Actual price​ (AP) paid for material

$ 1.75

$ 0.72

Actual quantity purchased​ (AQP) and used

1,000

oz.

2,800

oz.

Price variance

​?

$ 56

U

Quantity variance

$4,900

U

​?

Flexible budget variance

​?

$ 504

F

Number of units produced

700

400

What is the direct materials flexible budget variance for​ ammonia?

A.

$6,400

favorable

B.

$6,400

unfavorable

C.

$3,400

unfavorable

D.

$3,400

favorable


Answers

Solution:

The correct answer is Option (B). $6,400 unfavorable

From the given data first we need to Calculate Direct Material Price Variance

Direct Material Price Variance = Actual Material Purchased(Actual Rate - Standard Rate)

Direct Material Price Variance = 1,000 * ($1.75 - $0.25)

= $1,500 (Unfavorable)

Then we Calculate,

Direct Material Flexible Budget Variance = Direct Material Price Variance + Direct Material Quantity Variance

Flexible Budget Variance for Ammonia = $1,500 (U) + $4,900 (U)

= $6,400(Unfavorable)

.

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