Machine Builders Inc. adopted a standard cost system several years ago that it u

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Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system.M The per-unit standard costs for direct materiels and direct labor for its single product are as follows: Materials: (3.50 kilogramsxS8.80 per kilogram)530.80 Labor/3.40 hours x $15.60 per hour) S 53.04 All materials are issued at the beginning of processing The operating data shown below were taken from the records for July Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system The par-unit standard costs for direct materials and diract laborfor its singla product are as follows Materials: 3.50 kilograms $8.80 per kilogram)$3o.80 Labor: (B,40 hours x$15.60 per hour) S53.04 All materials are issued at the beginning of processing. The operating dats shown below were taken from the records for July: In-process ending inventory-80,006 complete as to labor Units completed Budgeted output Purchases of materials in kilograms (AQ) Total actual labor costs incurrad Direct labor hours worked (AQ Materials purchase-price variance Increase in materials inventory in July Baginning inventory of materials In-process beginning inventory in-process ending inventory-80.00% complete as to labor Units completed Budgeted output Purchases of materials in kilograms (AQ) Total actuel lebor costs incurred Direct labor hours worked (Aa) Materials purchase-price veriance Increase in materials inventory in July Besinning inventory of materials 900 units 6,140 units 6,900 units 900 units 6,140 units 6,900 units 26,000 $467,000 26,000 $467,000 24,300 hours 2,500 unfavorabl 1,300 kilograms 24,300 hours $2,500 unfevorable 1,300 kilograms The materials price variance calculatad when the materials are used: $2,375 unfavorable $15,226 unfavorable $87,920 unfavorable $528 unfavorable $2,500 unfavorable Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system The per-unit standard costs for direct materials and direct lebor for its single product are as follows: Materials: (3.50 kilograms xS8.80 per kilogram)530.80 Labor: (3.40 hours$15.60 per hour) $53.04 All materials are issued at the beginning of processing, The operating data shown below were taken from the records for July The direct labor flexible-budget variance for July was: $103,146 unfavorable $2,500 unfavorable $15,226 unfavorable $87,920 unfavorable $2,375 unfavorable 720 6,860 24010 374556 592,444 in-process ending inventory-80.00% complete a s to labor Units completed Budgeted output Purchases of materials in kilograms (AQ Total actual labor costs incurrad Direct labor hours worked (AQ Materials purchase-price variance Increase in materials inventory in July Boginning inventory of materials 900 units 6,140 units 6,900 units 26,000 $467,000 24,300 hours $2,500 unfavorable 1,300 kilograms The standard cost of materials usad in production was: 5467,000 217,360 5379,080 5216,832 5219,735

Explanation / Answer

Solution 1:

Raw material purchase quantity = 26000 Kg

Material purchase price variance = $2,500 U

Actual cost of material purchased = 26000*$8.80 + $2,500 = $231,300

Actual price of direct material = $231,300 / 26000 = $8.89615

Ending raw material inventory = 1300 Kg

Actual material consumed = 26000 - 1300 = 24700 Kg

Material price variance on the basis of material usage = (SP - AP) * AQ used

= ($8.80 - $8.89615) * 24700 = $2,375 U

Hence first option is correct.

Solution 2:

Standard cost of material used in production = Actual material used * Standard price of material

= 24700 * $8.80 = $217,360

Hence 2nd option is correct.

Solution 3:

Equivalant unit of direct labor = 6140 + (900*80%) = 6860 units

Standard cost of direct labor = 6860 * 3.40 * $15.60 = $363,854

Actual cost of direct labor = $467,000

Direct labor flexible budget variance = Standard cost - Actual cost = $363,854 - $467,000 = $103,146 U

Hence first option is correct.

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