Question

Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in a digital equipment product, Flex 10. Information concerning its operation in June is as follows: Budgeted units of Flex 10 for June 5,900 Budgeted usage of PPS 53,100pounds Actual number of units of Flex 10 manufactured 4,900 PPS purchased 57,720pounds PPS used 48,000pounds Total actual cost of PPS used$266,880 Direct materials usage variance$28,860unfavorable Assume that Norio recognizes the material purchase-price variance at the point of purchase. The direct materials purchase-price variance (rounded to the nearest dollar) is:

Answer 1

Answer: $106,205

Explanation:

Direct materials purchase-price variance = PPS pounds purchased * (Standard cost per pound - Actual cost per pound)

Standard cost per pound = Direct materials usage variance / [PPS used - (Actual number of units of Flex produced * (Budgeted usage of PPS / Budgeted units for Flex 10))]

= 28,860/ [48,000 - (4,900 * (53,100 / 5,900))]

= $7.40

Actual cost per pound:

= Total actual cost of PPS used / PPS Used

= 266,880 / 48,000

= $5.56

Direct materials purchase-price variance = 57,720 * (7.40 - 5.56)

= $106,205