Adler Industries Uses a Standard Cost System in Which Direct

question 150

Essay

Adler Industries uses a standard cost system in which direct material is carried at standard cost.Adler has established the following standards for one unit of product: standard quantity of 8 pounds, standard price $1.80 per pound.During January, Adler purchased 160,000 pounds of direct material at a cost of $304,000 and used 142,500 pounds in production of 18,700 units.
Required:
Calculate the direct materials price variance and indicate whether the variance is favorable or unfavorable.

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Definitions:

Aggregate Demand And Supply Model

An economic model that explains price levels and the production of goods and services through the relationship between aggregate demand and supply.

Short-Run Phillips Curve

Describes the inverse relationship between the rate of inflation and the unemployment rate over a short period.

Rational Expectations

The theory that people optimally use all the information they have, including information about government policies, when forecasting the future.

Sacrifice Ratio

A measure of the economic cost associated with reducing inflation, often calculated as the percentage loss in output per percentage point decrease in inflation.