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Balt Company maintains a standard cost system; as such, all inventories, including materials, are carried on...

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Accounting

Balt Company maintains a standard cost system; as such, allinventories, including materials, are carried on the books atstandard cost. Last period, Balt used 6,000 pounds of Material H toproduce 850 units of Product C8. The company has established astandard of 7 pounds of Material H per unit of C8, at a price of$7.25 per pound of material. During the period, Balt purchased4,000 pounds of Material H. The company spent $27,000 during theperiod to purchase material H.


Required:

1. Calculate the direct materials purchase-price variance forthe period, rounded to the nearest dollar. (U or F)
2. Calculate the direct materials usage variance for the period,rounded to the nearest whole dollar. (U or F)

Answer & Explanation Solved by verified expert
3.8 Ratings (417 Votes)

  • [1]

Material Purchase Price Variance

(

Standard Rate

-

Actual Rate = $27000 / 4000 pounds

)

x

Actual Quantity purchased

(

$                               7.25

-

$                       6.75

)

x

4000

2000

Variance

$              2,000.00

Favourable-F

  • [2]

Material Usage Variance

(

Standard Quantity = 850 units x 7 pounds

-

Actual Quantity used

)

x

Standard Rate

(

5950

-

6000

)

x

$                           7.25

-362.5

Variance

$                  362.50 or $ 363

Unfavourable-U

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