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Deadeye operates a standard costing system in which all inventories are valued at standard cost. The standard direct material cost of one unit of product

Deadeye operates a standard costing system in which all inventories are valued at standard cost. The standard direct material cost of one unit of product MS is $36, made up of 48 kg of material H at $750 per kg. Material H is used only in the manufacture of product MS. The following information relates to last month:

Material H:
Purchased 40,000 kg for $294,000
Issued into production 36,500 kg
The finished output of MS 7,200 units

Required:

(a) Calculate the direct material price and usage variances for last month. (3 marks)

(b) Prepare a statement that reconciles the actual cost of material H purchased with the standard material cost of actual production of MS for last month. The statement should incorporate the variances calculated in (a). (3 marks)

(c) (i) Suggest ONE possible cause for EACH of the variances calculated in (a). (2 marks)

(ii) State to whom the direct material price variance should be reported and why. (2 marks) (10 marks)

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