Shade Company adopted a standard cost system several years ago. The standard cos

Question

Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (5.30 kilograms × $12.00/kilogram) = $63.60/unit. Direct labor (3.80 hours × $20.00 per hour) = $76.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for December: In-process beginning inventory None In-process ending inventory - 90.00% complete as to labor 1,014 units Units completed during he period 7,120 units Budgeted output 7,760 Purchases of materials (in kilograms) 41,000 Total actual direct labor cost incurred $555,059 Direct labor hours worked (AQ) 28,010 hours Materials purchase-price variance $1,690 favorable Increase in materials inventory in December 1,634 kilograms The actual total cost of direct materials used in production is: Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (5.30 kilograms × $12.00/kilogram) = $63.60/unit. Direct labor (3.80 hours × $20.00 per hour) = $76.00/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for December: In-process beginning inventory None In-process ending inventory - 90.00% complete as to labor 1,014 units Units completed during he period 7,120 units Budgeted output 7,760 Purchases of materials (in kilograms) 41,000 Total actual direct labor cost incurred $555,059 Direct labor hours worked (AQ) 28,010 hours Materials purchase-price variance $1,690 favorable Increase in materials inventory in December 1,634 kilograms The actual total cost of direct materials used in production is:

Explanation / Answer

Beg. WIP 0 Units Completed 7760 Units started(Bal.Fig) 8774 Ending WIP 1014 8774 8774 Actual Quantity used in production= Purchases- Closing stock= 41000-1634=39366 Material Price Variance=(Actual price-Standard price)Actual quantity used 1690=(AP-12)*39366 1690=39366*AP-12*39366 46502.2 1690=39366 AP-472392 472392 AP=(1690+472392)/39366 Actual Price/Kg.    = 12.04293 The actual total cost of direct materials used in production is: 39366*12.04293 = 474082 Material Quantity variance= (Actual quantity- Std. quantity for actual production)* Std.Price (39366-(8774*5.30))*12= -85634.4 Material Price variance = 1690 (F)(given) VERIFICATION Total material cost variance= Actual material cost- Std.material cost for actual prodn. 474082-8774*5.3*12 -83944.4

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