nwes y rigs plodu e ces ings lls best seling mo e as a dired rna 1 s slan ard o

Question

nwes y rigs plodu e ces ings lls best seling mo e as a dired rna 1 s slan ard o 11 grams u al a oy pe' "ng. This sp 1 allo has ? s an ard cost U $84.50 pe arr n he pas mon h the company purchased 1 1 400 ran s of his oy al a total cost of $729,600 A total of 11,100 grams were used last month to produce 1,0DD rings Read the requirenents Requirement 1. What is the actual cost per gram at the special alloy that LUnversity Rings purchased last month (Round your answer to the nearest cent) The actual cost per gram of the special alloy that University Rings purchased last month is S Requirements 1. Wihal is he aclual osper sarn of lhe special alkvy thal Universily Rinngs purchased last month? 2. What is the direct material price variance? 3. What is the direci materal quantty variance? 4. How might the drecl materia price variance for the company last month be causing the direct matorial quantity varianco? Print Done

Explanation / Answer

1. Actual cost per gram of special alloy purchased = $729600/11400 = $64

2. Direct material price variance = (AQ x AR) - (AQ x SR) = (11400 x $64) - (11400 x $64.50) = $5700 Favorable

3. Direct material quantity variance = (AQ x SR) - (SQ x SR) = (11100 x $64.50) - (11000 x $64.50) = $6450 Unfavorable

SQ = 1000 rings x 11 grams = 11000 grams

4. A favorable direct material price variance denotes that the actual price is lower than the standard price which may be due to material being of a lower, sub-standard or poorer quality than the standard material used. This inferior quality material may result in an increase in usage of material thereby resulting in an unfavorable direct material quantity variance.

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