Question

Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in a digital equipment product, Flex 10. Information concerning its operation in June is as follows:

Budgeted Units of Flex 10 for June..................................6,500

Budgeted usage of PPS.................................................58,500 pounds

Actual number of units of Flex 10 manufactured..................5,600

PPS purchased.............................................................72,000 pounds

PPS used.....................................................................54,000 pounds

Total actual cost of PPS used.......................................$332,640

Direct materials usage variance.....................................$36,000 unfavorable

Assume that Norio does not maintain an inventory of materials, so that the amount of materials used is equal to the amount of materials purchased. The cost of PPS in the flexible budget for the number of units manufactured this period (rounded to nearest dollsr)is:

a. 504,000

b. 513,000

c. 720,000

d. 585,000

e. 650,000

Answer 1

Standard Pounds of PPS pr unit = 58500/6500
	=9 pounds per unit
Actual Units produced = 5600
Standard Pounds Allowed for actual production = 5600 units *9
	=5600*9
	=50400 pounds
Direct materials usage variance = Standard Price Per Pound * ( Standard Pounds for actual production - Actual Pounds Used)
$36000 (U) = Standard Price Per Pound * (50400-54000)
Standard Price Per Pound = -$36000/-3600
Standard Price Per Pound = $10
Budgted SSP Cost under flexible budget
= Standard Pounds for actual production * standard price
=50400 pounds*$10 each
=$504000
Correct Option:a