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just olya [345]
3 years ago
5

A company had a budgeted production of 12000 units and actual production of 13200 units. Two types of raw material, P and Q are

used in the manufacturing of the products. The budgeted raw material requirement of the company was expected to be 3 lbs. of Material P at a price of $ 0.25 per lbs. and 2 lbs. of Material Q at a price of $ 0.35 per lbs. for every unit produced. The company actually ended up using 42000 lbs. of P at an actual cost of $0.19 per lbs. and 25000 lbs. of Q at an actual cost of $0.38 per lbs. Calculate Direct Material Price and Usage Variance for material P and Q.\
Business
1 answer:
lara31 [8.8K]3 years ago
6 0

Answer:

Direct Material Price Variance:

P = $2,520 F

Q = $750 U

Direct Material Usage Variance:

P = $1,500 U

Q = $350 U

Explanation:

a) Data and Calculations:

Budgeted production units = 12,000

Actual production units =       13,200

                                                                P           Q

Budgeted raw material per unit        3 lbs        2 lbs

Price per lbs                                       $0.25      $0.35

Budgeted raw materials              36,000 lbs  24,000 lbs

Actual lbs of raw materials          42,000 lbs  25,000 lbs

Actual price per lbs                          $0.19        $0.38

Direct Material Price Variance = (Standard Price - Actual Price) * Actual Qty

P = $0.25 - $0.19 * 42,000 = $2,520 F

Q = $0.35 - $0.38 * 25,000 = $750 U

Direct Material Usage Variance = (Standard Qty - Actual Qty) * Standard Price

P = 36,000 - 42,000 * $0.25 = $1,500 U

Q = 24,000 - 25,000 * $0.35 = $350 U

                                   

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Explanation:

(1) The journal entry for the transaction will be

Apr 1 Dr : Cash $18,270, Cr : common stock $18,270

Apr1 Dr: salary payable$381,Cr: cash $381

Apr 2 No entry required

Apr 3 Dr : supplies $1,320, Cr : Account payable $1,320

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Apr 11 Dr cash$ 711,Cr: unearned revenue$ 711

Apr 20 Dr: Cash $2,842, Cr : service revenue $2,842

Apr 30 Dr : $ Account Payable $305 Cr : Cash $305

(2) The T Account will be

Cash Account

Dr common stock $18,270, unearned revenue $711, service revenue $2,842

Cr : salary payable $381, salary expense $1,524, Account payable $305,Bal c/d $19,613 Total Dr $21,823, Cr : $21,823

Salary payable Account

Dr : cash $381,Cr: Balance c/d $381 Total Dr $381,Cr :$381

Account Receivable Account

Dr: service revenue $1,929, Cr: Balance c/d $1,929 Total Dr $1,929, Cr $1,929

Salary expense Account

Dr: salary expense $1,524, Cr Balance c/d $1,524, Total Dr $1,524,Cr $1,524

Common Stock

Dr : Balance c /d $18,270, Cr :Cash $18,270 Total Dr $18,270, Cr $18,270

Supplies Account

Dr: Account payable $1,320, Cr Balance c /d $1,320, Total Dr $1,320, Cr $1,320

Account Payable

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Service Revenue Account

Dr Balance c /d $4,771 Cr : Account Receivable $1,929, cash $2,842, Total Dr $4,771, Cr $4,771

Unearned Revenue Account

Balance c/d $711, Cr cash $711, Total Dr $711,Cr $711

(3) The trial balance as on 30/04/2017

Dr: Cash $19,613, salary payable $381, supplies $1,320, Account Receivable $1,929, salary expense $1,524 Total $24,767

Cr : Common Stock $18,270, Account Payable $1,015, service revenue $4,771, unearned revenue $711 Total $24,767

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Please kindly note that none of the

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