Question

Shoemaker Perkins Company uses a standard cost system for raw material X15. The standard cost is $10 per pound. The standard calls for 2 pounds of material X15 for each unit of the product manufactured. The company manufactured 600 units of the product in September. The actual price for Material X-15 purchased during the month was $1 per pound below the standard cost. The material usage variance in September was $3,000 unfavorable.
a. What is the actual usage of material (in pounds)?
b. What is the purchase-price variance for Material X in September?

Answer 1

Answer:

Actual Quantity 1500 pounds

Materials price variance $ 1500 Favorable

Explanation:

Shoemaker Perkins Company

Given

Each unit requires 2 pounds of materials X15 at standard.

Standard cost is $10 per pound

Actual Cost $ 9 per pound

Actual No of Units Manufactured = 600

Standard Quantity allowed= 600* 2= 1200 pounds

Materials Usage Variance = $3000 unfavorable

We find the actual quantity by putting the values from the given data in the formula of material quantity variance which is also called material usage variance.

Formula

a. Material Quantity Variance= (Standard Price * Actual Quantity)-(Standard Price * Standard Quantity)

$3000= $ 10*Actual Quantity- $ 10 * 1200

$3000= $ 10*Actual Quantity- 12000

$3000 + 12000= $ 10*Actual Quantity

$ 10*Actual Quantity=15000

Actual Quantity= 15000/10= 1500 pounds

Now the Materials price variance  can be calculated by putting the values in the formula of Materials price variance .

b.Materials price variance = (Actual Price * Actual Quantity)- (Standard Price * Actual Quantity)

Materials price variance =( $ 9 *1500)- ($10* 1500)

Materials price variance = 13500- 15000= $ 1500 Favorable

It is favorable because the standard price is more than the actual price.