Question

Martin Corp. had an unfavourable sales price variance of $5700 for 2009. Martin had budgeted for sales of 14 000 units at a sales price of $7 each. Actual sales in 2009 totalled 19 000 units.

What was the actual sales price per unit?

		$6.70
		$7.30
		$5.55
		$6.59 McCourt Inc. manufacturers a unique product. The company’s controller has prepared the following static budget for the month of February: Estimated production                                             300 units Direct labour per unit                                                  1 hour Direct labour required for estimated production    300 hours Average direct labour rate per hour                                $10 Estimated direct labour cost                                        $3000 Actual production during February was 275 units and actual direct labour cost was $2900. If McCourt prepares a flexible budget for February, direct labour cost is estimated to be: $3000 $2750 $3165 $2900 For purposes of the calculation for the direct materials usage variance when the quantity of materials purchased and used are different, which quantity of materials is relevant? The lower of the actual quantity used or actual quantity purchased The lower of the standard quantity allowed or actual quantity purchased Actual quantity used Actual quantity purchased Lukey Products has an unfavourable materials usage variance. Which of the following would be the most likely reason for this variance? The company purchased material at a price for less than what was expected. The company budgeted for a lower sales volume than what actually occurred. The company underbudgeted the quantity of material to be used for each unit. The company did not use up all the material that had been purchased.   Byron Products has a favourable materials price variance. Which of the following would be the least likely reason for this variance? The company’s employees were more efficient with the use of their production time. The company overbudgeted the standard price for materials The company purchased a substandard material at a cheaper price.   The company took advantage of purchase discounts from their suppliers.

Answer 1

Solution 1:

Sales Price Variance = (Actual Price - Standard Price) * Actual Sale units

$5700 = (Actual Price - $7) *19,000

$5700/19000 = Actual Price - $7

0.30 = Actual Price - $7

Actual Price = 0.30 + $7 = $7.30

Hence second option is correct.

Solution 2:

Direct Labor Cost in flexible Budget = Actual Production unit * standard rate of Labor

= 275 *1 *$10 = $2,750

Hence, second option is correct.

Solution 3:

For the direct materials usage variance Calculation, Actual quantity used is relevant.

Hence Third option is correct.

Solution 4:

Reason for an unfavourable materials usage variance is that The company underbudgeted the quantity of material to be used for each unit.

Hence third opyion is correct.

Solution 5:

Least likely reason for favourable materials price variance is that the company’s employees were more efficient with the use of their production time.

Hence first option is correct.