QUESTION 1: Pardoe, Inc., manufactures a single product in which variable manufa
ID: 3109632 • Letter: Q
Question
QUESTION 1:
Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
• There was no beginning inventory of materials on hand to start the month; at the end of the month,
4,400 pounds of material remained in the warehouse.
$114,400 U
$35,100 F
$35,100 U
$114,400 F
QUESTION #2
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
$1,460 U
$1,420 F
$1,460 F
$1,420 U
Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
Explanation / Answer
Question 1:
Direct Material purchased during March = 22,000 pounds
Cost of 22,000 pound Material = $61,000
As we know, Direct Materials price variance = Actual Cost - Standard Cost of Actual Quantity
= (Actual Quantity x Actual Price) - (Actual Quantity x Standard Price)
= ($61,600)(22,000 pounds × $8.00 per pound)
= $61,600$176,000
= $114,400 F (Favourable)
Question 2:
Direct Material purchased during December = 18,830 ounces
Rate of Material = $7.10 per ounce
As we know, Direct Materials price variance = Actual Cost - Standard Cost of Actual Quantity
= (Actual Quantity x Actual Price) - (Actual Quantity x Standard Price)
= (18,830 ounce x $7.10 per ounce) (18,830 ounce × $7.30 per ounce)
= $1,33,693$1,37,459
= $3,766 F (Favourable)