Question
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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