Young 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.

Required:

Calculate the materials price and usage variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable.

a. Materials Price Variance $
b. Material Usage Variance $

a. Materials Price Variance - $330 favorable.

b. Material Usage Variance - $90 unfavorable.

Materials Price Variance = (Actual Quantity × Actual Price ) - (Actual Quantity × Standard Price )

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

= $330  Favorable

And,

Material Usage Variance = Standard Price × ( Standard Quantity - Actual Quantity)

= $ 0.045 × ( 108,000 - 110,000)

= $ 90 Unfavorable

Working Note :

Standard Quantity = Number of Bottles ×  0.45 ounce of plastic per bottle

= 240,000 ×  0.45

= 108,000 Ounces of Plastic

Therefore, we can conclude that

a. Materials Price Variance - $330 favorable.

b. Material Usage Variance - $90 unfavorable.

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Materials Price Variance $= 4620- 4950= 330 Favorable

Material Usage Variance $  = 4950-4860= 90 Unfavorable

Explanation:

a. Materials Price Variance $= Actual Price * Actual Quantity- Standard Price* Actual Quantity

Materials Price Variance $=$0.042* 110,000-$0.045*110,000

Materials Price Variance $= 4620- 4950= 330 Favorable

b. Material Usage Variance $= Standard Price *  Actual  Quantity- Standard Price* Standard Quantity

Material Usage Variance $  =0.045*110,000-$0.045*108000

Material Usage Variance $  = 4950-4860= 90 Unfavorable

  Actual Quantity       Actual Price      Standard Quantity  Standard Price

         1                             2                        3                              4

     110,000 ounces      $ 0.042              240,000*0.45          $ 0.045

                                                               = 10,8000

Materials Price Variance $= (1*2) - (1*4)= 110,000*$0.042 -110,000*$0.045

Materials Price Variance $=4620- 4950= 330 Favorable

Material Usage Variance $= (4*1)- (4*3)= 0.045*110,000-$0.045*108000

Material Usage Variance =4950-4860= 90 Unfavorable