Ferry Chemical Uses a Standard Cost System to Account for the Costs

question 39

Essay

Ferry Chemical uses a standard cost system to account for the costs of its production of Chemical X.Standards are 1.4 gallons of materials at $105 per gallon and 10 hours of labor at a standard wage rate of $12.During September,Ferry Chemical produced 2,600 gallons of Chemical X.Ferry Chemical purchased and used totaled 3,560 gallons at a total cost of $381,180.Payroll totaled $302,730 for 25,430 hours worked.Calculate the:
a.direct materials price variance.
b.direct materials quantity variance.
c.direct labor rate variance.
d.direct labor efficiency variance.

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Definitions:

Appraisal Costs

Costs associated with inspecting and testing both raw materials and finished products to ensure quality standards are met.

Internal Failure Costs

Costs associated with defects found before the delivery of a product to the customer, such as scrap and rework expenses.

Responsibility Accounting

A system of accounting that segments financial information by areas of responsibility, allowing managers to be held accountable for their areas' financial performance.

Managers

Managers are individuals in an organization responsible for directing and overseeing the work of a group of people towards the achievement of goals.