A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 5,200 pounds of Material J that cost $9,880. The direct materials quantity variance is:
a. $120 favorable.
b. $400 unfavorable.
c. $520 unfavorable.
d. $520 favorable.
e. $400 favorable.

The correct  option is  B

$400 unfavorable

Explanation:

Material quantity variance occurs when the actual quantity used to achieved a given level of output is more or less than the standard quantity.

It is determined by the difference between the actual and standard quantity of material for the actual level of output multiplied by the the standard price

                                                                                                    pounds

Standard quantity allowed (5 × 1000)                                     5,000

Actual quantity                                                                         5,200

                                                                                                200 unfavorable

Standard price                                                                       ×$2

The quantity variance ($)                                                   $400unfavourable        

B) $400 unfavorable.

Explanation:

A variance is favorable when it increases net income and unfavorable when it does the opposite.

To calculate direct materials quantity variance we can use the following formula:

quantity variance = (AQ - SQ) x SP ⇒ if positive, variance is unfavorable, if negative variance is favorable

quantity variance = (5,200 - 5,000) x $2 = $400 unfavorable

In this case, even though the quantity variance was unfavorable, since the price variance ($520 favorable) was favorable and larger, the total variance is favorable.