Question

Enfield Industries purchased and consumed 61,000 gallons of direct material that was used in the production of 13,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Enfield's accounting records at the end of the period disclosed a material price variance of $6,100U and a material quantity variance of $2,800F, what is the actual price paid for a gallon of direct material? (Do not round intermediate calculations.)

Answer 1

Answer:

= $0.8 per unit

Explanation:

The question is to determine the Actual price paid for a gallon of direct material

This is answered in the following steps

Step 1) What is the standard Quantity allowed?

= Finished units of products x the manufacturing standard

= 13,000 units x 5 gallons = 65,000

What is the actual quantity consumed = 61,000 gallons

Meaning the Material Quantity variance =

Standard Quantity allowed - Actual Quantity used = 65,000 - 61,000

= 4000

Step 2) Determine the Standard Price

= The disclosed material QUantity Variance/ The determined material Quantity Variance

= 2800F/ 4,000

= 0.7 per unit

Step 3) Determine Material Price Variance

= Actual Quantity (Standard Price - Actual Price

= $6,100u = 61,000 (0.7 - Actual Quantity)

= $0.8 per unit

Answer 2

Answer:

Explanation:

To solve for the actual std cost we need to work out the price variance:

$(standard\:cost-actual\:cost) \times actual \: quantity= DM \: price \: variance$

But, first we need to solve for standard cost using the quantity variance:

actual quantity of gallon

61,000 gallon used

standard gallon:

13,000 units x 5 gallon each = 65,000

$(standard\:quantity-actual\:quantity) \times standard \: cost = DM \: quantity \: variance$

(65,000 - 61,000) x std cost = 2,800

std cost  =  2,800 / 4,000  =  $ 0.70

Now, we return to price variance formula and solve for actual cost:

$(standard\:cost-actual\:cost) \times actual \: quantity= DM \: price \: variance$

(0.70 - actual cost) x 61,000 = -6,100

0.70 + 6,100 / 61,000 = actual cost

0.80 = actual cost