Question

Part of your company’s accounting database was destroyed when Godzilla attackedthe city. Through careful recreation of data, you have been able to determine thatduring the previous period, 20,000 units of product were produced. Raw MaterialsInventory increased by 2,000 ounces during the period. Reports show that the directmaterial price variance was a favorable $120,000 for the period and the total directmaterial variances was a favorable $40,000. The actual price paid for direct material during the period was $14 per ounce, which was $3 less per ounce than expected.Calculate the quantity allowed per unit of output.

After solving everything to get the quantity allowed per unit of output, why does 33,647 get divided by 20,000? Or in other terms, why does total expected out get divided by units produced when units produced is usually found in the DL variance?

Answer 1

Solution : Calculate allowed per unit - Qunatity allowed in ounces Number of units S = 33,647 20.000 -1.68 ounces per unit. .. The quantity of allowed per unit of output is 1.6 Bounces. Given that The actual price period ounce = $14 $ 3 less standand price per ounce = Actual Price per ounce +$3. 3 = $14 + $3 - $17. i standard price per ounce is $17. quantity purchased follows. Direct material price variance - Quantity purchased x (standard Price Actual Price) $190,000 -- Quantity purchased x($17-614) Quantity purchased, $100,000 $3 - 40,000 ounces.

urchase is 40.000 ounces. quantity used as calculation follows: Quantity used = Quantity purchased -2,000 -40,000 - 2,000 . The - 38,000 ounces quantity used is 36.000 ounces.