Question

You have been given the following list of variances for the Pennadi Company:

  

Direct materials price variance	$	16,800	U
Direct materials quantity variance		12,000	U
Direct labour rate variance		16,270	F
Direct labour efficiency variance		27,000	U
Variable overhead spending variance		3,120	U
Variable overhead efficiency variance		6,000	U
Fixed overhead budget variance		5,000	U
Fixed overhead volume variance		53,250	F

You have also been given the following information:

  

Actual units produced		25,000
Budgeted units of production (normal volume)		20,000
Standard labour-hours for actual output		12,500
Standard material units for actual output		400,000
Actual direct labour costs	$	235,730
Actual cost of direct materials	$	496,800

Overhead is applied using direct labour-hours. Variable overhead is applied at the rate of $10 per direct labour-hour. The materials purchase price was $0.828.(Attempt the following questions in the order listed.)

Required:
1.	What was the actual number of units of direct materials purchased?

2.	What was the standard cost of the actual number of units of direct materials purchased and the standard price of direct materials? (Round your answer to 2 decimal places.)

3.	What cost for direct materials will be reported in the flexible budget?

4.	What is the standard cost of direct materials used in production?

5.	How much direct materials were consumed in production?

6.	How many actual direct labour-hours were worked?

7.	What was the standard cost per unit of output produced, assuming that variable costing was used?

8.	Calculate the budgeted fixed overhead cost allocation rate. (Round your answer to 2 decimal places.)

9.	Calculate the actual, budgeted, and allocated fixed overhead costs.

10.	Calculate the underapplied or overapplied fixed overhead cost.

Answer 1

Solution 1:

Actual cost of direct material = $496,800

Material purchase price = $0.828

Actual number of units of direct materials purchased = $496,800 / $0.828 = 600000 units

Solution 2:

Direct material price variance = $16,800 U

(SP - AP) * AQ purchased = -$16800

(SP - $0.828) * 600000 = -$16,800

Standard price of direct material = $0.80 per unit

standard cost of the actual number of units of direct materials purchased = 600000 * $0.80 = $480,000

Solution 3:

Cost of direct material to be reported in flexible budget = Standard quantity of material for actual output * Standard price of material per unit

= 400000 * $0.80 = $320,000

Solution 4:

Direct material quantity variance = $12,000 U

(SQ - AQ)* SP = -$12,000

(400000 - AQ) * $0.80 = -$12,000

Actual quantity of material used in production = 415000 unit

Standard cost of direct material used in production = 415,000 * $0.80 = $332,000

Solution 5:

Direct material consumed in production = 415000 units