Question

Ringo Industries has the following information regarding direct materials:Actual pounds purchased and used58,000Standard quantity4 pounds per finished goodActual production15,000 finished goodsDirect materials efficiency variance$10,500 FavorableDirect materials price variance$29,000 UnfavorableCompute Ringo's actual price per pound.

Answer 1

Answer:

Actual Price = $5.75 per pound

Explanation:

Provided Actual Usage = 58,000 pounds

Standard = 4 pounds per finished goods,

Provided finished goods = 15,000 units

Standard Raw Material = 15,000 $\times$ 4 pounds = 60,000 pounds

Provided Direct Material Efficiency Variance is Favorable

= (Standard Usage - Actual Usage) $\times$ Standard Price

= (60,000 - 58,000)$\times$Standard Price = $10,500

=2,000 $\times$ SP = $10,500

Standard Price = $10,500/2,000 = $5.25

Direct Material Price Variance = (Actual Price - Budgeted Price) $\times$ Actual Quantity

We will calculate Actual Price using the above data,

(Actual Price (AP) - $5.25) $\times$ 58,000 = $29,000 Unfavorable

As This variance is unfavorable, which means Actual Price is higher than Budgeted Price

AP - $5.25 = $29,000/58,000 = $0.5

Actual Price = $0.5 + $5.25 = $5.75 per pound