The Following Standards Have Been Established for a Raw Material

question 6

Essay

The following standards have been established for a raw material used in the production of product U98:

$\begin{array}{|l|r|l|}\hline \begin{array}{l}\text { Standard quantity of the material per } \\\text { unit of output }\end{array} & 2.6 & \text { pounds } \\\hline \text { Standard pric e of the material } & \$ 14.50 & \begin{array}{l}\text { per } \\\text { pound }\end{array} \\\hline\end{array}$ The following data pertain to a recent month's operations: $$\begin{array} { | l | r | l | } \hline \text { Actual material purchased } & 7,600 & \text { Pounds } \\\begin{array} { l } \text { Actual cost of material } \\\text { purchased }\end{array} & \$ 110,960 & \\\hline \begin{array} { l } \text { Actual material used in } \\\text { production }\end{array} & 7,300 & \text { Pounds } \\\hline \text { Actual output } & 2,800 & \begin{array} { l } \text { units of product } \\\text { U98}\end{array} \\\hline\end{array}$$ 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:

Equivalent Cost

The combined costs of direct materials and conversion costs (labor and overhead) for partially completed goods, used in process costing environments.

Weighted-Average Method

An inventory costing method that calculates the cost of ending inventory and the cost of goods sold based on the weighted average cost of all items available for sale.

Direct Labor Cost

The total expense that a company incurs for labor directly involved in the production process.

Equivalent Units

A concept in process costing that converts partially completed units into a smaller number of fully equivalent units, facilitating cost assignment.