24) is giving me trouble 24) Dozen Bakery makes cupcakes and cookies. Dozen gath

Question

24) is giving me trouble

24) Dozen Bakery makes cupcakes and cookies. Dozen gathered the following information for the 24) current year regarding its use of flour and is a direct material for cookies): butter (flour is a direct material for cupcakes and butter Flour (Direct Materials) Cupcakes 2 lbs $2.50/lb Butter (Direct Materials) Cookies 3 lbs Standard quantity per batch Standard price per pound of sugar Actual quantity purchased and used per batch (pounds) Actual price paid Price variance Quantity variance Flexible budget variance Number of units produced 4 lbs $3.00/lb $300 U $500 F $5.50/lb. $500 F $2,400 F 400 350 What is the standard direct material price per pound for the butter in the cookies? A) $5.50/lb. B) $5.75/lb. C) $6.00/lb. D) $7.25/lb.

Explanation / Answer

(24) Computation of the standard direct material price per pound for the butter in the cookies.We have,

Step1: Computation of the material quantity variance for butter.We have,

Flexible budget variance = Material price variance + Material quantity variance

2,400 (F) = 500(F) + Material quantity variance

Material quantity variance = 2,400 - 500 = $ 1,900 (F)

Step2: Computation of the standard price per pound for butter.We have,

Material quantity varince = (Actual quantity - Standard quantity) x Standard price

1,900 = ( 400 x 4 - 400 x 3 ) standard price

Standard price = 1,900 / 400 = $ 4.75 per pound

Hence, the standard direct material price per pound is $ 4.75.

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