Question
chapter 11 accounting
You have been given the following ist 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 $15,900 U 10,400 U 10,020 F 54,000 U 2,280 U 4,600 U 3,600 U 75,950 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 26,000 19,000 13,000 260,000 $199,980 $360,400 Overhead is applied using direct labour-hours Variable overhead is applied at the rate of $15 per direct labour-hour The materials purchase price was $O 680 (Attempt the following questions in the order listed) Required 1. What was the actual number of units of direct materials purchased? 2. What was the standard cost of the actual number of units of direct materials purchased and the standard price of direct materials? (Round your answer to 2 decimal places.) d cost 3. What cost for direct materials will be reported in the flexible budget?
Explanation / Answer
1)Material purchase price variance = Actual cost of material / material purchase price
= 360400/.680
= 530000
2)Material purchase price variance =AQ purchased [AR-SR]
15900 U= 530000[.680 -SR]
15900 /530000 = .680-SR
.03 =.680-SR
SR = .680-.03 =$ .65 per pound
3)Amount to reported in flexible budget =Actual quantity *SR
= 530000*.65 = $ 344500
4)Standard cost of material used in production :
Material quantity variance = [AQ*SR] - Standard cost
10400 =[530000*.65] -Standard cost used in production
10400 = 344500 -SC.
Standard cost used in production = 344500-10400 = $ 334100
