Accelerator, Inc. manufactures a fuel additive called surge. The company produce
ID: 2567377 • Letter: A
Question
Accelerator, Inc. manufactures a fuel additive called surge. The company produces and sells 87,000 containers of surge each month. The company has established the following standards for each container of surge produced: standard quantity standard price direct materials 7 gallons $4.00 per gallon direct labor 2.50 hours $14.00 per hour The following information is available for surge for the month of May: 1. 650,000 gallons of chemicals were purchased at a cost of $2,522,000. At May 31, Accelerator, Inc. had 30,000 gallons of chemical available in the storeroom. 2. 215,000 direct labor hours were worked during May at a total cost of $3,096,000. Calculate the direct material price variance for May. If the variance is unfavorable, enter a U after your number with a space between the number and the U (i.e., 10,000 U). If the variance is favorable, enter an F after your number with a space between the number and the F (i.e., 10,000 F).
Explanation / Answer
Standard price per gallon A $4.00 Chemicals purchased (gallons) B 650000 Ending invetory of chemicals(gallons) C 30000 Chemicals consumed (gallons) (B - C) D 620000 Cost of chemicals purchased E 2522000 Actual price of chemicals per gallon (E / B) F 3.88 Direct material price variance = (Std.Price - Actula price) x actual quantity = (A- F ) x D Direct material price variance = 74400 F