A. The quantity variance (also called the efficiency or usage variance) is calculated as: (AQ - SQ) × SP or (Actual Quantity - Standard Quantity for Actual Output) × Standard Price. This answer results from using the standard quantity of materials for the master budget production output of 8,000 units (8,000 × 3 lbs. per unit, or 24,000 lbs.) instead of the standard quantity for the actual output. See the correct answer for a complete explanation.
B. The quantity variance (also called the efficiency or usage variance) is calculated as: (AQ - SQ) × SP. This answer results from using the actual price of $1.55 ($38,750 total cost ÷ 25,000 lbs. purchased) instead of the standard price.C. This is the difference between the actual quantity of materials used in production (23,000 lbs.) and the actual quantity of materials purchased (25,000 lbs.) times the standard price ($1.60), which does not mean anything. See the correct answer for a complete explanation.
D. The quantity variance (also called the efficiency or usage variance) is calculated as: (AQ - SQ) × SP or (Actual Quantity - Standard Quantity for Actual Output) × Standard Price. The actual quantity of material used was 23,000 lb. The standard quantity of material scheduled for actual output was 22,500 lb. (7,500 units of finished product × 3 lb. of material needed to complete one unit of product). The standard price is $1.60. The quantity variance is (23,000 - 22,500) × $1.60 = $800 unfavorable. The quantity of material used for production was greater than the amount allowed for the production, which creates an unfavorable variance.
