Kennewick Company makes and markets specialty products. Their trusted accountant
ID: 2588262 • Letter: K
Question
Kennewick Company makes and markets specialty products. Their trusted accountant suddenly died of a heart attack. You are called in to help them out. Your examination of Kennewick's accounting records uncovers the following data for the month of August: Direct Materials Purchases Direct Materials Used 20,000 Units 15,000 Units You also found a recent budget indicating that Direct Materials were expected to cost $0.60/unit. You also discovered that the company has been recording Direct Materials Price Variances at the time that materials are purchased. In addition, you came upon some notes showing the following: Direct Materials Price Variance Direct Materials Quantity/Efficiency Variance $200 Favorable $600 Favorable During August, what was the total cost of Direct Materials Purchases?Explanation / Answer
Direct material price variance = $200 favourable
Direct material price variance = (Actual quanity * actual price) - (Actual quanity * std. price)
200 = (15000* actual price) - (15000*0.6)
Therefore actual price = $0.61
Total cost of direct material purchases = actual price * direct material purchases
= 0.61*20000
= $12,267
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