# Answered Essay: Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard di

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

 Standard Quantity Standard Price or Rate Standard Cost Direct materials 1.5 pounds \$ 7.50 per pound \$ 11.25 Direct labor 0.6 hours \$ 24.00 per hour \$ 14.40 Variable manufacturing overhead 0.6 hours \$ 5.75 per hour \$ 3.45

During March, the following activity was recorded by the company:

The company produced 6,600 units during the month.

A total of 13,400 pounds of material were purchased at a cost of \$37,520.

There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,680 pounds of material remained in the warehouse.

During March, 4,160 direct labor-hours were worked at a rate of \$24.50 per hour.

Variable manufacturing overhead costs during March totaled \$14,552.

The direct materials purchases variance is computed when the materials are purchased.

The materials quantity variance for March is:

Multiple Choice

\$6,150 F

\$20,620 F

\$20,620 U

\$6,150 U

 Answer d. \$6,150 (U) Material Quantity Variance = (SQ – AQ) X SR AQ = 13,400 Pounds (Material Purchased) – 2,680 Pounds (Ending Inventory) AQ = 10,720 pounds SQ = 1.50 Pounds X 6,600 Units = 9,900 Pounds Material Quantity Variance = (9,900 Pounds – 10,720 Pounds) X \$7.50 Material Quantity Variance = \$6,150 (U)
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