Doogan Corporation makes a product with the following standard costs:

Doogan Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate
Direct materials		2.0	grams	$	7.00	per gram
Direct labor		1.4	hours	$	10.00	per hour
Variable overhead		1.4	hours	$	4.00	per hour

The company produced 4,800 units in January using 10,320 grams of direct material and 2,300 direct labor-hours. During the month, the company purchased 10,890 grams of the direct material at $7.20 per gram. The actual direct labor rate was $10.75 per hour and the actual variable overhead rate was $3.90 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials quantity variance for January is:

Multiple Choice

• $5,184 U
• $5,184 F
• $5,040 F
• $5,040 U

  Correct

Explanation

SQ = 4,800 units × 2.0 grams per unit = 9,600 grams

Materials quantity variance = (AQ – SQ) × SP

= (10,320 grams − 9,600 grams) × $7.00 per gram

= (720 grams) × $7.00 per gram

= $5,040 U