Question

Illumi Enterprises sells plastic containers. It recently lost some accounting data because one of its employees accidentally deleted a data file. This forced the company to use incomplete information to analyze operations. Consider the following data for the most recent month of operations during which 10,000 containers were produced and sold. A specific type of plastic granules (this is the only direct material used in production) is used to make the containers. Assume that all materials purchased during the period were used in production. The following is the incomplete data available for direct material used in production during the month:

Direct materials:

      Standard price per pound: $10

      Actual price per pound: $9

      Price variance: $8,000 F

      Quantity variance: $2,000 U

The budgeted direct material quantity allowed per plastic container is:

		0.78 lbs
		0.82 lbs
		0.62 lbs
		0.70 lbs
		0.66 lbs
		0.85 lbs

Answer 1

Direct Materials price variance = (Actual quantity * Actual price) - (Actual quantity * Standard price)

$(8,000) = Actual quantity * ($9 - $10)

Actual quantity = 8,000 pounds

Direct Materials quantity variance = (Actual quantity * Standard price) - (Standard quantity * Standard price)

$2,000 = (8,000 - Standard quantity) * $10

8,000 - Standard quantity = 200

Standard quantity = 8,200

The budgeted direct material quantity allowed per plastic container = 8,200 / 10,000

= 0.82 lbs