MPI's Potato Company produces ready-to-eat mashed potatoes for resale at food stores. UMPI expected to use 5
Question:
MPI's Potato Company produces ready-to-eat mashed potatoes for resale at food stores. UMPI expected to use 5 pounds of direct materials to produce one unit (batch) of product (mashed) at a cost of $5 per pound. Actual results are in for last year, which indicates 55,000 batches of mashed potatoes were sold. The company purchased 300,000 pounds of materials at $4.60 per pound and used 280,000 pounds in production. 1) Calculate the materials price variance. Indicate if it is favorable or unfavorable to the company. 2) Calculate the materials quantity variance. Indicate if it is favorable or unfavorable to the company. 3) Provide a logical reasoning for the materials price and quantity variances calculated in 1 and 2. 4) Suggest several possible reasons for the materials price and quantity variances calculated in requirements (1) and (2).
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan