4) Assume the following information for Webster Company: 200 items 200 items $7,

Question

4) Assume the following information for Webster Company: 200 items 200 items $7,000 Beginning Raw Materials Inventory (Quantity): Budgeted Ending Raw Materials Inventory (Quantity) Budgeted direct materials (Purchased): Standard quantity of direct materials per unit Budgeted production Actual Ending Raw Materials Inventory (Quantity): Actual direct materials costs (Purchased): Actual quantity of direct materials used per unit: Actual production: 20 items 100 units 175 items $7,500 19 items 150 units Answer the following questions; Budget: a) Budgeted Quantity used in production- b) Budgeted Quantity purchased- c) Standard Price per item- Actual: a) Actual Quantity used in production b) Actual Quantity Purchased- c) Actual Price (purchased) per item (do not round, leave in calculator for final answern Therefore, what is Webster's Direct Materials Price Variance?

Explanation / Answer

Budget:

a) Budgeted quantity used in production = Budgeted production x Standard quantity of direct materials per unit = 100 units x 20 items = 2000 items

b) Budgeted quantity purchased = Budgeted quantity used in production + Budgeted ending raw materials inventory – Beginning raw materials inventory = 2000 + 200 – 200 = 2000 items

c) Standard price per item = Budgeted direct materials (purchased)/Budgeted quantity purchased = $7000/2000 items = $3.50

Actual:

a) Actual quantity used in production = Actual production x Actual quantity of direct materials used per unit = 150 units x 19 items = 2850 items

b) Actual quantity purchased = Actual quantity used in production + Actual ending raw materials inventory – Beginning raw materials inventory = 2850 + 175 – 200 = 2825 items

c) Actual price (purchased) per item = Actual direct materials cost (purchased)/Actual quantity purchases = $7500/2825 items = $2.654867256

Direct Materials Price Variance = (Actual quantity purchased x Actual price) – (Actual quantity purchased x Standard price) = $7500 - (2825 x $3.50) = $7500 - $9887.50 = $2387.50 Favorable

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