[shanek327]

See below….my answer is B, but the answer should be C…can anyone explain?

Mo’ Joe Coffee Houses has noticed that its contribution margin is shrinking and is analyzing the direct materials used in its operations for price and usage components. The company purchased 30,000 pounds of coffee for $112,500. Based on its sales, the company estimates that only 26,000 pounds of coffee should have been used, however, 28,000 were actually used. The standard cost per pound was budgeted at $3.10. In computing its two-way direct material variances, Mo’ Joe determines the following components are either favorable or unfavorable:

Price

Quantity (Usage)

a.

($25,700)

($12,500)

b.

($19,500)

$6,200

c.

($19,500)

($6,200)

d.

($19,500)

($12,500)

FAR - 75
AUD - 78
BEC - 82
REG - 77

2 Corinthians 5:21

Our value does not come from our skills and abilities, as good as they may be; it does not come from our GPA, our job, a promotion from that job to a better job, our success on the CPA exam, or anything of the like; but our value comes from the fact that we have a Creator who loves us, cares for us, and desires to help us navigate the rough waters of this life in a way that provides security, hope, and true, everlasting joy while we anticipate the life to come, with Him.

[Anonymous]

Hi Shane. To solve this problem, you only need to find the DM Qty (Usage) Variance. AQ = 28,000, SP = $3.10, and SQ = 26,000. These are all given in the question. AQ X SP = $86,800 and SQ X SP = $80,600. Since actual qty cost is greater than std qty cost, the variance is unfavorable by $6,200.

[Author]

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