Value given in the question | ||||
Actual quantity of direct materials | 31,600 | |||
Actual costs of direct materials | $144,200 | |||
Standard price per unit of direct materials |
$4.36 | |||
Flexible budget for direct materials | $122,900 | |||
Actual unit price = Actual costs/Actual quantity | ||||
= $ 144.200/31,600 | ||||
= $ 4.56 | ||||
Direct materials price variance = (Actual unit cost - Standard unit cost) * Actual quantity of direct materials | ||||
= ($ 4.56 - $ 4.36) * 31,600 | ||||
= $ 0.20 * 31,600 | ||||
= $ 6,424 | ||||
The variance is unfavorable since actual unit cost is higher than the standard unit cost | ||||
Calculation of Flexible budget variance | ||||
Flexible budget variance = Actual costs of direct materials - Flexible costs of direct materials | ||||
= $ 144,200 - $ 122,900 | ||||
= $ 21,300 | ||||
The variance is unfavorable since actual costs are higher than the flexible costs | ||||
Flexible budget variance = Price variance + Efficiency variance | ||||
Hence, | ||||
Direct materials efficiency variance = Flexible budget variance - Direct material price variance | ||||
= $ 21,300 - $ 6,424 | ||||
= $ 14,876 | ||||
Since, both Flexible budget variance and Price variance are unfavorable,the efficiency | ||||
variance is also unfavorable | ||||
Answer | ||||
Direct materials price variance | $6,424 | U | ||
Direct materials efficiency variance | $14,876 | U | ||
b. | ||||
Computation of standard units of direct materials used | ||||
Efficiency Variance = (Actual quantity of direct materials - Standard quantity of direct materials)*Standard Price | ||||
=$ 14,876 = (31600 - Standard quantity of direct materials) * $ 4.36 | ||||
= (31600 - Standard quantity of direct materials) = $ 14,876/ $ 4.36 | ||||
= (31600 - Standard quantity of direct materials) = $ 3,412 | ||||
Standard quantity of direct materials = 31,600 - 3,412 | ||||
= 28,188 | ||||
Journal entry using standard costing | ||||
Standard cost of direct material = Standard quantity * Standard price | ||||
= $ 4.36 * 28,188 | ||||
= $ 122,900 | ||||
Account Title and Explantion | Debit | Credit | ||
Raw material inventory( 31,600 * 4.36) | $137,776 | |||
Direct material price variance (31,600 *0.20) | $6,424 | |||
Accounts payable | $144,200 | |||
(being the direct materials purchased recorded at standard costs) | ||||
Account Title and Explanation | Debit | Credit | ||
Work in progress (31600 * $ 4.36) | $137,776 | |||
Direct material efficiency variance | $14,876 | |||
Direct material inventory (28164* $ 4.36) | $122,900 | |||
(being the direct materials used recorded at standard cost) | ||||
Note - Absolute values of actual price per unit have been used in the calculations. | ||||
Other derived values have been rounded off to the nearest whole number |
Information on Bowgie Chemicals direct materials costs follows. Actual quantities of direct materials used Actual costs...
Information on Bowgie Chemicals direct materials costs follows: Actual quantities of direct materials used 31,400 Actual costs of direct materials used $ 142,600 Standard price per unit of direct materials $ 4.34 Flexible budget for direct materials $ 122,500 Bowgie Chemicals has no materials inventories. Required: a. Prepare a short report for management showing Bowgie Chemicals's direct materials price and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is...
Information on Bowgie Chemicals direct materials costs follows. Actual quantities of direct materials used 31,900 Actual costs of direct materials used $ 146,600 Standard price per unit of direct materials $ 4.39 Flexible budget for direct materials $ 123,500 Bowgie Chemicals has no materials inventories. Required: a. Prepare a short report for management showing Bowgie Chemicals’s direct materials price and efficiency variances. b. (Appendix) Prepare the journal entries to record the purchase and use of the direct materials using standard...
Information on Bowgie Chemicals direct materials costs follows. Actual quantities of direct materials used30,800Actual costs of direct materials used$137,800Standard price per unit of direct materials$4.28Flexible budget for direct materials$121,300 Bowgie Chemicals has no materials inventories. Required:a. Prepare a short report for management showing Bowgie Chemicals’s direct materials price and efficiency variances.b. (Appendix) Prepare the journal entries to record the purchase and use of the direct materials using standard costing.
Information on Bowgie Chemicals direct materials costs follows. Actual quantities of direct materials used30,800Actual costs of direct materials used$137,800Standard price per unit of direct materials$4.28Flexible budget for direct materials$121,300 Bowgie Chemicals has no materials inventories. Required:a. Prepare a short report for management showing Bowgie Chemicals’s direct materials price and efficiency variances.b. (Appendix) Prepare the journal entries to record the purchase and use of the direct materials using standard costing.
Information on Grand Corporation's direct materials costs follows. Quantities of chemical Y purchased and used Actual cost of chemical Y used Standard price per gallon of chemical Y Standard quantity of chemical Y allowed 19,600 gallons $427,000 $ 22.90 18,000 gallons bok Grand Corporation has no materials inventories. Required: a. What were Grand Corporation's direct materials price and efficiency variances? b. (Appendix) Prepare the journal entries to record the purchase and use of chemical y using standard costing. Complete this...
Information on Grand Corporation’s direct materials costs follows. Quantities of chemical Y purchased and used 19,400 gallons Actual cost of chemical Y used $ 426,000 Standard price per gallon of chemical Y $ 22.70 Standard quantity of chemical Y allowed 17,800 gallons Grand Corporation has no materials inventories. Required: a. What were Grand Corporation’s direct materials price and efficiency variances? b. (Appendix) Prepare the journal entries to record the purchase and use of chemical Y using standard costing.
Howard Company has established the following standards: Direct materials: 3.0 pounds at $4.00 Direct labor: 1.3 hours at $10 per hour Additional information was extracted from the accounting records: Actual production: 20,000 completed units Direct materials purchased: 67,000 pounds at $3.60, or $241,200 Direct materials consumed: 65,000 pounds Actual labor incurred: 25,000 hours at $9.8, or $245,000 Direct-labor rate variance: $42,000 favorable Direct-labor efficiency variance: $27,000 unfavorable Assume that the company computes variances at the earliest point in time. Required:...
Steinberg Company had the following direct materials costs for the manufacturing of product T in March: Actual purchase price per pound of direct materials Standard direct materials allowed for units of product T produced Decrease in direct materials inventory Direct materials used in production Standard price per pound of material $ 8.10 2,700 pounds 160 pounds 2,900 pounds $ 7.85 Required: 1. What was Steinberg's direct materials purchase-price variance and its direct materials usage variance for March? Indicate whether each...
Required information [The following information applies to the questions displayed below.] Hart Company made 3,080 bookshelves using 22,080 board feet of wood costing $276,000. The company's direct materials standards for one bookshelf are 8 board feet of wood at $12.40 per board foot. AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price (1) Compute the direct materials price and quantity variances and classify each as favorable or unfavorable. (2) Hart applies management by...
Steinberg Company had the following direct materials costs for the manufacturing of product T in March: Actual purchase price per pound of direct materials Standard direct materials allowed for units of product T produced Decrease in direct materials inventory Direct materials used in production Standard price per pound of material $ 8.10 2,700 pounds 160 pounds 2,900 pounds $ 7.85 Required: 1. What was Steinberg's direct materials purchase-price variance and its direct materials usage variance for March? Indicate whether each...