xercise 23-9 (Part Level Submission) You have been given the following informati
ID: 2524367 • Letter: X
Question
xercise 23-9 (Part Level Submission)
You have been given the following information about the production of Usher Co., and are asked to provide the plant manager with information for a meeting with the vice president of operations.
Standard Cost Card
Direct materials (9 pounds at $3 per pound) $27.00
Direct labor (0.80 hours at $5) 4.00
Variable overhead (0.80 hours at $3 per hour) 2.40
Fixed overhead (0.80 hours at $8 per hour) 6.40
$39.80
The following is a variance report for the most recent period of operations.
Variances
Costs
Total Standard Cost
Price
Quantity
Direct materials $406,000 $6,670 F $9,400 U
Direct labor 60,148 4,500 U 7,300 U
(c)
What was the actual cost per pound of raw materials? (Round answer to 2 decimal places, e.g. 1.25.)
Actual cost per pound of raw materials $ /lbExplanation / Answer
Solution:
Actual cost per pound of raw materials can be calculated by using the Material Price Variance.
Material Price Variance = (Actual Quantity Purchased x Std Price) - (Actual Quantity x Actual Price)
$6,670 F = (AQ x $3) - (AQ x Actual Price)
Material Quantity Variance = Std Price (Actual Quantity – Std Quantity)
$9,400 U = (Std Price x Actual Quantity) – (Std Price x Std Quantity i.e. Total Standard Cost)
$9,400 U = ($3 x AQ) - $406,000
AQ = (9,400 + 406,000) / 3 = 138,466.67
Putting the value of Actual Quantity in the equation of material price variance, we get
$6,670 F = (AQ x $3) - (AQ x Actual Price)
6,670 = (138,466.67 x $3) – (138,466.67 * AP)
6,670 = $415,400 – 138,466.67 * AP
AP = $2.95 per pound
Actual Cost per pound of raw materials = $2.95 per pound
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