You have been given the following list of variances for the Pennadi Company: Dir

Question

You have been given the following list of variances for the Pennadi Company: Direct materials price variance Direct materials quantity variance Direct labour rate variance Direct labour efficiency variance Variable overhead spending variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance $12,600 U 10,500 U 8,070 F 45,500 U 2,220 U 4,500 U 3,500 U 70,200 F You have also been given the following information Actual units produced Budgeted units of production (normal volume) Standard labour-hours for actual output Standard material units for actual output Actual direct labour costs Actual cost of direct materials 25,000 18,500 12,500 250,000 $199,930 $327,600 Overhead is applied using direct labour-hours. Variable overhead is applied at the rate of $14 per direct labour-hour. The materials purchase price was $0.624.(Attempt the following questions in the order listed.) Required 1. What was the actual number of units of direct materials purchased? Number of units 2. What was the standard cost of the actual number of units of direct materials purchased and the standard price of direct materials? (Round your answer to 2 decimal places.) Standard cost

Explanation / Answer

Total material variance = price variance +quantity variance

                 = 12600 +10500

                  = 23100 U

Total variance = Actual cost -[Standard quantity *standard rate]

23100 = 327600- [250000*SR]

23100 = 327600 -250000SR

250000SR =327600-23100

SR = 304500/250000=$ 1.218 PER UNIT

1)Actual quantity purchased = Actual cost of material /material price

            =327600/.624

            = 525000 units

2)material price variance =AQ purchased [AR-SR]

12600 = 525000[.624- SR]

12600/525000 = .624- SR

SR = .624-.024

    = $ .60 PER UNIT

3)Cost of material reported in flexible budget = Actual quantity purchased * standard rate

          = 525000*.60

           = $ 315000

4)Standard cost of material used in productio =standard material for actual output *SR

                 = 250000*.60

                = $ 150000

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