[HCPA]

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)

Based on my calculation, 6200 is positive and it is unfav because AQ is greater than SQ. So I am not sure they the answer is (6200) instead of 6200. Thanks

[ohiostategirlcpa]

Unfavorable is always listed as negative.
Favorable is always positive.

F91 A95 R90 B94
CMA since 2015
(Gleim books/PDFs, MCQs, SIMS)

[HCPA]

Thanks.

[Author]

Replies