Shoemaker Perkins Company uses a standard cost system and had 410 pounds of raw

Question

Shoemaker Perkins Company uses a standard cost system and had 410 pounds of raw material X15 on hand on September 1. The standard cost is $10.30 per pound. The standard calls for 2.10 pounds of material X15 for each unit of the product manufactured. The company manufactured 630 units of the product in September, and had 520 pounds of Material X-15 in stock on September 30. The actual price for Material X-15 purchased during the month was $1.00 per pound below the standard cost. The material usage variance in September was $3,100 unfavorable. What is the purchase-price variance for Material X in September? Shoemaker Perkins Company uses a standard cost system and had 410 pounds of raw material X15 on hand on September 1. The standard cost is $10.30 per pound. The standard calls for 2.10 pounds of material X15 for each unit of the product manufactured. The company manufactured 630 units of the product in September, and had 520 pounds of Material X-15 in stock on September 30. The actual price for Material X-15 purchased during the month was $1.00 per pound below the standard cost. The material usage variance in September was $3,100 unfavorable. What is the purchase-price variance for Material X in September?

Explanation / Answer

Raw Material X15 Opening Stock 410 Pounds Standard Price $10.30 Production 630 units Actual Price $9.30 Standard Quantity 2.1 Pounds for 1 unit of Output Standard Quantity for 630 units =      630 x 2.1 1323 Pounds Direct Material usage Variance = (Standard Quantity x Standard price) - (Actual Quantity x Standard Price) -3100 = (1323 x 10.30) - (Actual Quantity x 10.30) Actual Quantity                                 = 1624 Pounds Hence Actual Quantity used in Production = 1624 Pounds Additional Purchase on account of Stock = Closing Stock- Opening Stock = (520 - 410) Pounds = 110 Pounds Total Purchases = (1624+110) Pounds = 1734 Pounds Direct Material Price Variance = ( Standard Price - Actual Price ) x Actual Quantity =(10.30 - 9.30)x 1734 1734 Favorable Since, Purchase price has been reduced from standard @ $ 1 per Pound Therefore, there is a favorable price Variance of $ 1734 for X15

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