The document discusses calculating material variances using standard costs. It provides an example where a company had a standard cost of $5 per kg for fiberfill material, but actually purchased it for $4.90 per kg. This resulted in a $21 favorable price variance. However, the actual quantity of material used was 10 kg more than the standard quantity, resulting in a $50 unfavorable quantity variance. The document also discusses calculating variances when the quantity purchased differs from the quantity used.

1. Variazione dei Costi
Standard
Materie prime

2. Standard Costs
Let’s use the general model
to calculate standard cost
variances for
direct material.

3. Glacier Peak Outfitters has the following
direct material standard 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.
Material Variances
Example

4. 210 kgs. 210 kgs. 200 kgs.
× × ×
$4.90 per kg. $5.00 per kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000
Price variance
$21 favorable
Quantity variance
$50 unfavorable
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
Material Variances
Summary

5. 210 kgs. 210 kgs. 200 kgs.
× × ×
$4.90 per kg. $5.00 per kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000
Price variance
$21 favorable
Quantity variance
$50 unfavorable
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
$1,029 ÷ 210 kgs
= $4.90 per kg
Material Variances
Summary

6. 210 kgs. 210 kgs. 200 kgs.
× × ×
$4.90 per kg. $5.00 per kg. $5.00 per kg.
= $1,029 = $1,050 = $1,000
Price variance
$21 favorable
Quantity variance
$50 unfavorable
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
0.1 kg per parka × 2,000 parkas
= 200 kgs
Material Variances
Summary

7. Note: Using the formulas
Materials price variance
MPV = AQ (AP - SP)
= 210 kgs ($4.90/kg - $5.00/kg)
= 210 kgs (-$0.10/kg)
= $21 F
Materials quantity variance
MQV = SP (AQ - SQ)
= $5.00/kg (210 kgs-(0.1 kg/parka × 2,000 parkas))
= $5.00/kg (210 kgs - 200 kgs)
= $5.00/kg (10 kgs)
= $50 U

8. Quick Check ƴ
Suppose only 190 kgs of fiberfill were used to
make 2,000 parkas. What is the materials
quantity variance? Remember that the
standards call for 0.1 kg of fiberfill per parka at a
cost of $5 per kg of fiberfill.
a. $50 F
b. $50 U
c. $100 F
d. $100 U
Suppose only 190 kgs of fiberfill were used to
make 2,000 parkas. What is the materials
quantity variance? Remember that the
standards call for 0.1 kg of fiberfill per parka at a
cost of $5 per kg of fiberfill.
a. $50 F
b. $50 U
c. $100 F
d. $100 U

9. Suppose only 190 kgs of fiberfill were used to
make 2,000 parkas. What is the materials
quantity variance? Remember that the
standards call for 0.1 kg of fiberfill per parka at a
cost of $5 per kg of fiberfill.
a. $50 F
b. $50 U
c. $100 F
d. $100 U
Suppose only 190 kgs of fiberfill were used to
make 2,000 parkas. What is the materials
quantity variance? Remember that the
standards call for 0.1 kg of fiberfill per parka at a
cost of $5 per kg of fiberfill.
a. $50 F
b. $50 U
c. $100 F
d. $100 U
Quick Check 
MQV = SP (AQ - SQ)
= $5.00/kg (190 kgs-(0.1 kg/parka ×2,000 parkas))
= $5.00/kg (190 kgs - 200 kgs)
= $5.00/kg (-10 kgs)
= $50 F

10. If the material quantity standard specifies
exactly how much material should be in the final
product without any wastage, is a favorable (F)
materials quantity variance a good thing?
a. Yes
b. No
If the material quantity standard specifies
exactly how much material should be in the final
product without any wastage, is a favorable (F)
materials quantity variance a good thing?
a. Yes
b. No
Quick Check 

11. Quick Check 
If the material quantity standard specifies
exactly how much material should be in the final
product without any wastage, is a favorable (F)
materials quantity variance a good thing?
a. Yes
b. No
If the material quantity standard specifies
exactly how much material should be in the final
product without any wastage, is a favorable (F)
materials quantity variance a good thing?
a. Yes
b. No

12. Standard Costs
Let’s use the general model
to calculate all standard cost
variances, starting with
direct material.

13. Hanson Inc. has the following direct material
standard to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week 1,700 pounds of material were
purchased and used to make 1,000 Zippies.
The material cost a total of $6,630.
Material Variances
Example
Zippy

14. What is the actual price per pound
paid for the material?
a. $4.00 per pound.
b. $4.10 per pound.
c. $3.90 per pound.
d. $6.63 per pound.
What is the actual price per pound
paid for the material?
a. $4.00 per pound.
b. $4.10 per pound.
c. $3.90 per pound.
d. $6.63 per pound.
Quick Check  Zippy

15. What is the actual price per pound
paid for the material?
a. $4.00 per pound.
b. $4.10 per pound.
c. $3.90 per pound.
d. $6.63 per pound.
What is the actual price per pound
paid for the material?
a. $4.00 per pound.
b. $4.10 per pound.
c. $3.90 per pound.
d. $6.63 per pound.
AP = $6,630 ÷ 1,700 lbs.
AP = $3.90 per lb.
Quick Check  Zippy

16. Hanson’s material price variance
(MPV)
for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
Hanson’s material price variance
(MPV)
for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
Quick Check  Zippy

17. Hanson’s material price variance
(MPV)
for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
Hanson’s material price variance
(MPV)
for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
MPV = AQ(AP - SP)
MPV = 1,700 lbs. × ($3.90 - 4.00)
MPV = $170 Favorable
Quick Check  Zippy

18. The standard quantity of material that
should have been used to produce
1,000 Zippies is:
a. 1,700 pounds.
b. 1,500 pounds.
c. 2,550 pounds.
d. 2,000 pounds.
The standard quantity of material that
should have been used to produce
1,000 Zippies is:
a. 1,700 pounds.
b. 1,500 pounds.
c. 2,550 pounds.
d. 2,000 pounds.
Quick Check  Zippy

19. The standard quantity of material that
should have been used to produce
1,000 Zippies is:
a. 1,700 pounds.
b. 1,500 pounds.
c. 2,550 pounds.
d. 2,000 pounds.
The standard quantity of material that
should have been used to produce
1,000 Zippies is:
a. 1,700 pounds.
b. 1,500 pounds.
c. 2,550 pounds.
d. 2,000 pounds.SQ = 1,000 units × 1.5 lbs per unit
SQ = 1,500 lbs
Quick Check  Zippy

20. Quick Check 
Hanson’s material quantity variance (MQV)
for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
Hanson’s material quantity variance (MQV)
for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
Zippy

21. 1,700 lbs. 1,700 lbs. 1,500 lbs.
× × ×
$3.90 per lb. $4.00 per lb. $4.00 per lb.
= $6,630 = $ 6,800 = $6,000
Price variance
$170 favorable
Quantity variance
$800 unfavorable
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
Material Variances
Summary
Zippy

22. Material Variances
Hanson purchased and
used 1,700 pounds.
How are the variances
computed if the amount
purchased differs from
the amount used?
The price variance is
computed on the entire
quantity purchased.
The quantity variance
is computed only on
the quantity used.

23. Hanson Inc. has the following material
standard to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week 2,800 pounds of material were
purchased at a total cost of $10,920, and
1,700 pounds were used to make 1,000
Zippies.
Material Variances
Continued
Zippy

24. Actual Quantity Actual Quantity
Purchased Purchased
× ×
Actual Price Standard Price2,800 lbs. 2,800 lbs.
× ×
$3.90 per lb. $4.00 per lb.
= $10,920 = $11,200
Price variance
$280 favorable
Price variance increases
because quantity
purchased increases.
Zippy
Material Variances
Continued

25. Actual Quantity
Used Standard
Quantity
× ×
Standard Price Standard Price
1,700 lbs. 1,500 lbs.
× ×
$4.00 per lb. $4.00 per lb.
= $6,800 = $6,000
Quantity variance
$800 unfavorable
Quantity variance is
unchanged because
actual and standard
quantities are unchanged.
Material Variances
Continued
Zippy

26. Isolation of Material
Variances
I need the price variance
sooner so that I can better
identify purchasing problems.
You accountants just don’t
understand the problems that
purchasing managers have.
I’ll start computing
the price variance
when material is
purchased rather than
when it’s used.

27. Responsibility for Material
Variances
I am not responsible for
this unfavorable material
quantity variance.
You purchased cheap
material, so my people
had to use more of it.
You used too much material
because of poorly trained
workers and poorly
maintained equipment.
Also, your poor scheduling
sometimes requires me to
rush order material at a
higher price, causing
unfavorable price variances.