You have been given the following list of variances for the Pennadi Company: Dir

Question

You have been given the following list of variances for the Pennadi Company: Direct materials price variance Direct materials quantity variance Direct labour rate variance Direct labour efficiency variance Variable overhead spending variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance $11,300 U 11,700 U 16,620 36,000 U 2,700 U 5,300 U 4,300 U 67,200 F You have also been given the following information Actual units produced Budgeted units of production (normal volume) Standard labour-hours for actual output Standard material units for actual output Actual direct labour costs Actual cost of direct materials 30,000 22,500 12,000 330,000 $235,380 $265,550 Overhead is applied using direct labour-hours. Variable overhead is applied at the rate of S10 per direct labour-hour. The materials purchase price was $0.470.(Attempt the following questions in the order listed.) Required 1. What was the actual number of units of direct materials purchased? Number of units 565,000 2. What was the standard cost of the actual number of units of direct materials purchased and the standard price of direct materials? (Round your answer to 2 decimal places.) Standard cost 3. What cost for direct materials will be reported in the flexible budget? lexible budget

Explanation / Answer

Solution 1:

Direct material purchase price = $0.470 per unit

Actual direct material cost = $265,550

Actual number of units of direct material purchased = $265,550 / $0.470 = 565000 units

Solution 2:

Direct material price variance = $11,300 U

(SP - AP) * AQ Purchased = -$11,300

(SP - $0.470) * 565000 = -$11,300

Standard price of direct material (SP) = $0.45 per unit

standard cost of actual number of unit of direct material purchased = 565000 * $0.45 = $254,250

Solution 3:

Cost of direct material to be reported in flexible budget = Standard quantity for actual output * Standard price

= 330000 * $0.45 = $148,500

Solution 4:

Direct material quantity variance = $11,700 U

(SQ - AQ) * SP = -$11,700

(330000 - AQ) * $0.45 = -$11,700

Actual quantity of material used = 356000 units

Standard cost of direct material used in production = 356000 * $0.45 = $160,200

Solution 5:

Direct material consumed in production = 356000 units

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