Topaz Company makes one product and has set the following standards for material
ID: 2451782 • Letter: T
Question
Topaz Company makes one product and has set the following standards for materials and labor Direct Materials Direct Labor During the past month the company purchased 6,600 pounds of direct materials at a cost of $20,130. All of this material was used in the production of 1,240 units of product. Direct labor cost totaled $45,150 for the month. The following variances have been computed: Required: For direct materials: Compute the standard price per pound for materials Compute the standard quantity allowed for materials for the month s production Compute the standard quantity of materials allowed per unit of productExplanation / Answer
a. Calculation of Standard price per pound of material:
Material Price Variance = Total Material Spending variance - Material Quantity Variance
=640 F – 1340 U = 640 +1340 =$1980 F = -1980
Material Price Variance = (Actual Price – Standard Price ) * Actual Quantity
Actual Price = $20130 / 6600 Pounds = $3.05 Per Pound
Hence,
-1980 = (3.05 – Standard Price) *6600
-1980/6600 = 3.05 – Standard Price
-0.3 =3.05 – Standard Price
Standard Price = 3.05 + 0.3 = $3.35 Per Pound
b. Calculation of Standard quantity allowed for material :
Material Quantity Variance = (Actual Quantity – Standard Quantity) * Standard Price
1340 = (6600 – Standard Quantity)*3.35
1340 / 3.35 = 6600 – Standard Quantity
400 = 6600 – Standard Quantity
Standard Quantity = 6600 -400 = 6200 Pounds
c. Calculation of Standard quantity of material allowed per unit of output:
Total Standard Quantity Allowed= 6200 Pounds
Units of output = 1240
Standard quantity of material allowed per unit of output = 6200 /1240 = 5 Pounds