Craig’s Pizza is a small Italian specialty company which makes frozen food. Its feature product is Tuscano Margherita Pizza, which requires the following recipe:
• 1 unit pizza dough (purchased from supplier)
• 8 oz. fresh mozzarella cheese
• 4 oz. pepperoni
• 4 oz. tomato sauce
• 3 tablespoons fresh basil
The tomato sauce is purchased in 32 oz. cans which normally cost $1.60 each from a supplier. Recently, the company purchased a batch of overstock for $1.50 ea. There were no cans in stock of the regular price prior to restocking. The production workers noted that in this batch of canned tomatoes there were some larger chunks of tomato which would not be consistent with product quality. Craig noted that to prepare 15,000 pizzas for distribution, 1,900 cans were used during the month. What are the respective and material price and efficiency variances for the month of production?
a. $190.00 U $40.00 U
b. $40.00 U $190.00 U
c. $190.00 F $40.00 F
Selected: d. $190.00 F $40.00 U This answer is correct.
Correct! Material price = actual usage x (actual – standard price) = 1900 X -$.10 = -$190.00 favorable
Material efficiency = standard price x (actual – standard usage) = $1.60 x [1900- ((15000×4)/32)] = $40.00