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Unformatted text preview: Folk Exam Questions - Chapter 8 1. Perpignan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Perpignan has established the following standards for the prime costs of one unit of product: Standard Standard Standard Quantity Price Cost Direct materials 12.0 pounds $ 7.00/pound $ 84.00 Direct labor 2.6 hours $22.00/hour 57.20 $141.20 During June, Perpignan purchased 330,000 pounds of direct material at a total cost of $2,343,000. The total factory wages for June were $1,600,000, 90 percent of which were for direct labor. Perpignan manufactured 25,000 units of product during June using 302,000 pounds of direct material and 64,000 direct labor hours. What is the price variance for the direct material acquired by the company during June? Solution: First, calculate the actual price per unit of materials as follows: $2,343,000 ÷ 330,000 lbs. = $7.10/lb. Then calculate the materials price variance as follows: Materials price variance = Actual quantity x (Actual price – Standard price) Materials price variance = AQ x (AP – SP) Materials price variance = 330,000 x ($7.10 – $7.00) = $33,000 Unfavorable (U)Materials price variance = 330,000 x ($7....
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- Summer '11
- Direct material price variance, PERPIGNAN