This answer is based on the assumption that only one unit of raw material is required to produce one unit of finished product. In fact, two units of raw material are required.
In this question, we need to solve the materials quantity variance formula for AQ. The variance formula is (AQ ? SQ) × SP. SQ can be calculated because the company produced 12,000 units, and two units of raw materials are required for each unit of output. Therefore, the standard quantity for the actual output was 24,000 units. The standard price per unit of raw material can also be calculated, because the standard cost allowed for the actual output was $60,000. Since the standard quantity for the actual output was 24,000 units, the standard price per unit of raw materials was $60,000 ÷ 24,000, or $2.50. We are given the quantity variance as $2,500 unfavorable. Therefore, the formula is: (AQ ? 24,000) × $2.50 = $2,500 Solving for AQ, we get AQ = 25,000, as follows: 2.5AQ ? 60,000 = 2,500 2.5AQ = 62,500 AQ = 25,000
This answer is based on the assumption that the materials quantity variance was favorable. It was, in fact, unfavorable.
12,000 is the number of units of finished product produced.
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