In Producing 700 Units of Product Last Period, Azure Company

question 165

Essay

In producing 700 units of product last period, Azure Company used 5,000 pounds of Material K, costing $34,250. The company has established the standard of using 7.2 pounds of Material K per unit of product, at a price of $7.50 per pound. Calculate the materials price and quantity variances associated with producing the 700 units, and indicate whether they are favorable or unfavorable:

---

Definitions:

Equivalent Units

A technique in cost accounting used to allocate costs to partially completed goods, expressed in terms of fully completed units.

FIFO Method

Another term for FIFO, emphasizing its role as an accounting method where the oldest inventory items are recorded as sold first.

Equivalent Unit

A concept in cost accounting used to allocate costs to partially completed goods, converting them into the amount of finished goods units that could have been produced with the same amount of input.

Cost Assignment

The process of identifying and allocating costs to cost objects, such as products, services, or departments.