The following direct material information is available for Company? A\'s most re

Question

The following direct material information is available for Company? A's most recent month of? operations:

Standard price per unit of input . . .? $16 per pound

Actual price per unit of input . . .? $14 per pound

Direct Materials Price Variance . . .? $120,000 Favorable

Total Direct Materials Variance . . .? $40,000 Favorable

The actual output during the period was? 26,625 units. The direct materials inventory increased by? 2,000 pounds during the period. The standard quantity of direct material allowed is

A. 2.25 pounds per unit

B. 1.81 pounds per unit

C. 2.75 pounds per unit

D. 2.00 pounds per unit

E.3.13 pounds per unit

Standard price per unit of input . . .? $16 per pound

Actual price per unit of input . . .? $14 per pound

Direct Materials Price Variance . . .? $120,000 Favorable

Total Direct Materials Variance . . .? $40,000 Favorable

Explanation / Answer

Direct material price variance = (Standard price-actual price)actual quantity

120000 = (16-14)X

120000 = 2X

X(Actual quantity) = 60000 pound

Direct material efficiency variance = (Standard qty-actual qty)Standard rate

-80000 = (X-58000)*16

-80000 = 16X-928000

-16X = -848000

X(standard quantity) = 53000

Standard quantity of direct material allowed = 53000/26625 = 2.00

so answer is d) 2.00 pound per unit

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