The Heavenly Gifts Company, a maker of Holiday novelties, needs your help immedi

Question

The Heavenly Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. In reviewing the records, you find the following information for May:

Materials purchased = 20,000 units

Material used = 15,000 units

You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers, which indicate the following:

Materials price variance = $200 favorable

Materials efficiency (quantity) variance = $600 favorable
  

1.        what was the total actual cost of the direct materials purchased during May?

$9000 , $11800, $12000, $12200

2.        what was the total standard cost of direct materials purchased during May?

$9150 , $11800 , $12000 , $12200

3.        what was the total standard cost of direct materials allowed during May?

$8260 , $8400 , $9440, $9600

Explanation / Answer

Total budgeted costs=0.6 per unit*20000=$12000

Price variance=$200(favourable)

Hence Total actual costs=$11800

2)Total standard costs of materials purchased shall be=Budgeted cost per unit*Actual quantity purchased

=0.6 per unit*12000+Price variance

=$12000+200

=$12200

3)Now Standard costs allowed shall be equal to=Budgeted costs+Usage variance

=0.6*15000+600

=$9600

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