topaz company makes one product and has set the following standards for material

Question

topaz company makes one product and has set the following standards for materials and labor:

direct labor

during the past month, the company purchased 6,000 pounds of direct materials at a cost of $16,500. all of this material was used in the production of 1,400 units of product. direct labor cost totaled $28,500 for the month. the following variances have been computed:

1. for direct materials:

a. compute the standard price per pound for materials

b. compute the standard quantity allowed for materials for the month's production

c. compute the standard quantity of materials allowed per unit of product

direct materials

direct labor

standard quantity or hours per unit ? pounds 2.5 hours standard price or rate ? per pound $9.00 per hour standard cost per unit ? $22.50

Explanation / Answer

For Direct Material:

a. Standard price per pound for material is calculated as under:

Actual price of material is $16,500/6,000 pounds= 2.75 per pound

Total material spending variance is $300F so standard cost was $16,500+$300=$16,800

Standard price is $16,800/6,000= 2.8 per pound.

b.

Standard qty allowed for material for month's production is:

MQV= (SQ-AQ)*SP

1,200 U= (SQ-6,000)*2.8

SQ=5,571

Standarc qty allowed is 5,571 at a cost of 5,571*2.8= $15,599

c.

SQ of material allowed per unit of product is:

5,571/1,400= 3.97*2.8= 11.15 DM per unit.

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