The Following Standards Have Been Established for a Raw Material

question 156

Essay

The following standards have been established for a raw material used in the production of product U98:
$\begin{array}{llcc} \text {Standard quantity of the material per unit of output } & \text { 2.6pounds } \\ \text { Standard price of the material} & \text { \$ 14.50 Per pound} \\\end{array}$


The following data pertain to a recent month's operations:
$$\begin{array} { ll } \text { Actual material purchased } & 7,606 \text { Pounds } \\\text { Actual cost of material purchased } & \$ 110,960\\\text { Actual material used in production } & 7,300 \mathrm { Pounds } \\\text { Actual output } & 2,800 \text { units of product U98 }\end{array}$$
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
c. Prepare journal entries to record the purchase and use of the raw material during the month. (All raw materials are purchased on account.)

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Definitions:

Marginal Utility

The further gratification or value experienced by an individual upon consuming an extra unit of a particular good or service.

Supply-Side Market Failures

Situations where the supply side of a market does not allocate resources efficiently, often due to externalities or public goods problems.

Sellers

Individuals or entities that offer goods or services for sale in the market.

Cost-Benefit Analysis

A systematic approach to estimating the strengths and weaknesses of alternatives used to determine the best option through weighing the cost against the benefits.