Schemm Inc

question 144

Multiple Choice

Schemm Inc.regularly uses material F04E and currently has in stock 460 liters of the material for which it paid $2,622 several weeks ago.If this were to be sold as is on the open market as surplus material,it would fetch $5.25 per liter.New stocks of the material can be purchased on the open market for $5.85 per liter,but it must be purchased in lots of 1,000 liters.You have been asked to determine the relevant cost of 800 liters of the material to be used in a job for a customer.The relevant cost of the 800 liters of material F04E is:

• A)$5,850
• B)$4,200
• C)$4,404
• D)$4,680

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Definitions:

Isolating Variances

A process in managerial accounting for identifying and analyzing differences between actual and expected performance.

Direct Materials

Raw materials directly traceable and assignable to a manufactured product as it is being produced.

Direct Labour

The labor costs directly attributable to the production of goods or the provision of services.

Materials Price Variance

The difference between the actual cost of materials and the standard cost, indicating how much was saved or overspent on materials.