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GNBExam10 - GNB 12e Practice Exam Chapter 10 1 Prescott...

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GNB 12e Practice Exam – Chapter 10 1. Prescott Company employs a standard cost system in which direct materials inventory is carried at standard cost. The company has established the following standards for the prime costs of one unit of product: Standard Quantity Standard Price Standard Cost Direct labor 2.6 hours \$44.00/hour \$114.40 Direct materials 12.0 pounds \$14.00/pound 168.00 During April, the company purchased 330,000 pounds of direct material at a total cost of \$4,686,000. The total factory wages for June were \$3,200,000, of which 90% was for direct labor. The company manufactured 25,000 units of product during April using 302,000 pounds of direct material and 64,000 direct labor hours. Part (a) What is the price variance for the direct material acquired by the company during April? First, calculate the actual price per unit of materials as follows. Total cost of \$4,686,000 ÷ 330,000 lbs. = \$14.20 per pound Then calculate the materials price variance as follows. Materials price variance = AQ x (AP – SP) = 330,000 x (\$14.20 – \$14.00) = \$66,000 (U)

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This note was uploaded on 07/15/2010 for the course ECON 137A taught by Professor Watson during the Fall '08 term at UCSB.

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GNBExam10 - GNB 12e Practice Exam Chapter 10 1 Prescott...

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