A firm will exit a competitive market when A. costs force the marginal cost curve to shift to the left. B. the longrun profit wo
1 answer:
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Answer:
(A) the actual cost of materials was less than the standard cost.
Explanation:
Since actual production was 3,100 units we shall calculate standard cost for such product
standard cost of material per unit = 6 pounds for $0.30 per pound = $1.8 per unit
Cost for 3,100 units = 3,100 $1.8 = $5,580
Favorable material purchase price variance = $380 favorable
which means actual price was less than standard price,
Unfavorable material quantity variance of $120 means actual quantity used is more than standard quantity.
Material Quantity Variance = (Standard Quantity - Actual Quantity) Standard Price
Standard Quantity = 3,100 6 = 18,600
- 120 = (18,600 - AQ) $0.3
-120/0.3 = 18,600 - AQ
-400 = 18,600 - AQ
AQ = 18,600 + 400 = 19,000 units
Using material price variance, we have
$380 = ($0.3 - AP) 19,000
$380/19,000 = $0.3 - AP
$0.02 = $0.3 - AP
AP = $0.3 - $0.02 = $0.28
Therefore Actual Cost = 19,000 $0.28 = $5,320
Standard Cost = $5,580
Therefore correct statement is
(A) the actual cost of materials was less than the standard cost.