Question

Bixby Motor Oil has been experiencing increasingly unfavorable materials quantity variances since March. The company discovered that the cause was an old machine that was wasting more materials than normal. If the standard quantity for 10,000 units is 15,000 pounds and the direct materials price standard is $1.52 per pound, which of the following sets of data may have warned the company about the problem?
a. The actual quantity of 12,000 pounds used for the production of 10,000 units
b. The actual price of $1.50 per pound incurred for the production of 10,000 units.
c. Actual quantity of 17,000 pounds used for the production of 10,000 units.
d. Actual price of $1.55 per pound incurred for the production of 10,000 units.

Answer 1

Answer:

Option (c)

Explanation:

As per the data given in the question,

Standard quantity of material = 15,000 pounds for 10,000 units

Unfavorable variance in the quantity of material occurs when more material is used in comparison to the standard quantity.

As, Actual quantity = 17,000 pounds used for production of 10,000 units

It caused unfavorable material quantity variance.

Hence, the data which warned company about the problem is :

Actual quantity of 17,000 pounds used for the production of 10,000 units.

Option (c) is correct answer.