Young Inc. produces plastic bottles. Production of 16-ounce bottles has a standard unit quantity of 0.45 ounce of plastic per bottle. During the month of June, 240,000 bottles were produced using 110,000 ounces of plastic. The actual cost of plastic was $0.042 per ounce, and the standard price was $0.045 per ounce. There is no beginning or ending inventories of plastic.

Required:1. Calculate the materials price and usage variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable.

Materials Price Variance = (Actual Quantity * Actual Price) - (Actual Quantity * Standard Price)

= (110,000 * $ 0.042) - (110,000 * $ 0.045)

= $ 330 Favorable

Material Usage Variance = Standard Price * (Standard Quantity - Actual Quantity)

= $ 0.045 * (108,000 - 110,000)

= $ 90 Unfavorable

Note:

Standard Quantity = Number of Bottles * 0.45 ounce of plastic per bottle

= 240,000 * 0.45

= 108,000 Ounces of Plastic

Total Variance = 240 Favorable

Explanation:

Materials Cost Variance = (Actual Amount * Standard Cost) - (Actual Amount * Actual Cost)

Materials Cost Variance = (110,000 * $0.045) - (110,000 * $0.042)

Materials Cost Variance = 4950 - 4620

Materials Cost = $330 Favorable

Usage Variance = (Standard Amount - Actual Amount) * Standard Cost

Usage Variance = (108,000 - 110,000) * $0.045

Usage Variance = $90 Unfavorable

Note:

Standard Amount = Number of Bottles * Standard Unit Quantity

Standard Amount = 240,000 * 0.45

Standard Amount = 108,000 Ounces of Plastic

Thus,

Total Variance = Materials Cost Variance - Usage Variance

Total Variance = 330 - 90

Total Variance = 240 Favorable