Albrecht 19.pdf - Marriott School

76154_23_ch19_p942-1006.qxd 3/1/07 3:35 PM Page 986
986 Part 6 Control in a Management Accounting System | EOC
were put into production. The standard price per gallon is $3.20. Compute the following
variances:
1. The materials price variance if the chemical is carried in inventory at standard price
(i.e., the price variance is accounted for at the time of purchase).
2. The materials price variance if the chemical is carried in inventory at actual price and is
charged to Work-in-Process Inventory at the standard price (i.e., the price variance is accounted
for at the time of use in production).
E 19-24
LO2
Materials Price and Quantity Variances—Journal Entries
Genesis Enterprises produces one product—MX4. The following information relating to raw
materials is available for the month of March:
Beginning direct materials inventory . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases made during the month . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct materials placed in production . . . . . . . . . . . . . . . . . . . . . . . . .
1,500 pounds @ $3.10 per unit
11,000 pounds @ $3.10 per unit
11,750 pounds
The standard materials usage for one unit of MX4 is 2 pounds with a standard price per
pound of $3. Genesis produced 6,000 units of Product MX4 during the month.
1. Compute the materials price and quantity variances for Genesis assuming the materials
price variance is computed at the time of purchase.
2. Provide the journal entries required to record:
a. The purchase of direct materials and the materials price variance.
b. Placing the direct materials in production and the materials quantity variance.
E 19-25
LO2
Direct Materials Purchased and Used
Mary Clarke is concerned about her performance as a recently employed purchasing agent.
The accounting department has provided her with the following performance data for the
month of August:
Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078 tons
Materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400 tons at $43 per ton
The standard materials usage set by management for one unit of product is half a ton of materials
per unit, at $45 per ton. Her performance report shows the following variances:
Used (1,078 tons 1,000 tons standard) $45 per ton . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased ($45 per ton standard $43 per ton actual) 1,400 tons . . . . . . . . . . . . . . . . . .
$3,510 U
2,800 F
If you were Mary Clarke, how would you explain this report
E 19-26
LO2
E 19-27
LO2
Analyzing Materials Cost
Mr. Rogers, the production manager, has received a report showing a $10,800 unfavorable
total materials variance (materials price variance plus materials quantity variance). He knows
that production used 20,000 pounds less than the budgeted amount of direct materials allowed
for actual output. Mr. Rogers also knows that the standard price for direct materials
was determined to be 90 cents per pound.
What was the actual cost of direct materials used during the period if the standard
amount allowed was estimated to be 500,000 pounds
Materials Price and Quantity Variances
Daniel Smith, production manager, has just received a report stating that the total materials
variance (materials price variance plus materials quantity variance) for last month was
$6,710 unfavorable. However, he is not certain whether the production foremen are
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