Ladron Candies is analyzing sales and production data for the holiday boxes they produced last year. The company expected to use 2 pounds of direct…

The materials quantity variance measures the efficiency of material usage in production. It is calculated using the formula: (Actual Quantity Used – Standard Quantity Allowed) × Standard Price.

First, determine the Standard Quantity Allowed for the actual output:

800,000 boxes produced × 2 pounds/box = 1,600,000 pounds.

Next, apply the formula:

(1,580,000 pounds used – 1,600,000 pounds allowed) × $3.00 standard price

= (–20,000 pounds) × $3.00 = –$60,000.

Since the actual quantity used was less than the standard quantity allowed, the company was more efficient than planned, resulting in a favorable variance.

B. This is incorrect because using less material than the standard allowance is a favorable variance, not an unfavorable one.

C. This amount, $165,000, is the materials price variance, calculated as (Actual Price - Standard Price) × Actual Quantity Purchased, not the quantity variance.

D. This is incorrect as it reflects the materials price variance and misclassifies it as an unfavorable quantity variance.

1. Heisinger, K., & Hoyle, J. B. (2012). Managerial Accounting. Saylor Foundation. Chapter 10, Section 10.2, "Direct Material Variance Analysis." The text provides the formula for the materials quantity variance as (AQ – SQ) × SP, specifying that AQ is the actual quantity of materials used and SQ is the standard quantity allowed for the actual output.

2. Walther, L. M., & Skousen, C. J. (2009). Managerial and Cost Accounting. Bookboon. Chapter 8, "Standard Costs & Variances," pp. 82-83. This source defines the materials usage (quantity) variance and illustrates its calculation, emphasizing that a favorable variance occurs when the actual quantity used is less than the standard quantity.

3. MIT OpenCourseWare. (2004). 15.501 Introduction to Financial and Managerial Accounting, Class 19 Notes. MIT Sloan School of Management. The lecture notes define the Direct Material Quantity Variance as (AQ used - SQ allowed) × SP, confirming the components and calculation method used for the correct answer.