2. In its budgets Garnet planned on producing 30,000 units during August. The st

Question

2. In its budgets Garnet planned on producing 30,000 units during August. The standards for producing one unit of the company's product required the use of two pounds of raw materials. The company's managerial accountants calculated an unfavorable material quantity variance of $2,100 and a favorable material price variance of $3,000 for August. Moreover, the company produced 28,500 units during the month while purchasing 60,000 pounds of raw material and using 58,000 pounds of raw materials. Which of the following correctly states the standard price per pound of raw materials? A. $6.90 B. $2.10 C. $4.50 D. S0.90 F. None of the above

Explanation / Answer

Calculate standard price per pound :

Material quantity variance = (Standard quantity-actual quantity)Standard price

-2100 = (28500*2-58000)X

-2100 = 57000X-58000X

-2100 = -1000X

X(standard price per pound) = $2.10

so answer is b) $2.10

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