Porter Manufacturing Company uses a standard cost accounting system. In 2011, th
ID: 2586628 • Letter: P
Question
Porter Manufacturing Company uses a standard cost accounting system. In 2011, the company produced 28,000 units. Each unit took several pounds of direct materials and 2 standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 50,000 direct labor hours. During the year, 53,338 pounds of raw materials were purchased at $1.5 per pound. All materials purchased were used during the year. If the materials price variance was $4,605 favorable, what was the standard materials price per pound?Explanation / Answer
Material Price Variance = (Standard price - Actual price)*Actual Quantity
$4,605 = (Std. price - $1.5)*53,338 pounds
$4,605 = (Std. Price*53,338) - 80,007
$4,605+80,007 = Std. Price*53,338
Std. Price = 84,612/53,338 = $1.59 per pound
Thus the standard price per pound is $1.59.