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Question - At Kokomo, the standard price for the M640 electrical relay (a component used in the production of a commercial refrigeration unit) is $62. Standards call for 2.0 relays per unit of finished product. In July, the company purchased 163 relays for $8,965. The company used 105 relays in the production of 46 refrigeration units (4 relays were damaged in the installation process).
Calculate the material price variance and the material quantity variance related to the M640 electrical relay. Indicate whether the variances are favorable or unfavorable.
The following financial statements were drawn from the records of Boston Materials, Inc.:
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