The Standards for Product C78 Call for 2

question 26

Essay

The standards for product C78 call for 2.0 pounds of a raw material that costs $13.30 per pound. Last month, 5,900 pounds of the raw material were purchased for $74,045. The actual output of the month was 2,640 units of product C78. A total of 5,300 pounds of the raw material were used to produce this output.
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:

Reservation Price

The maximum amount a consumer is willing to pay for a good or service.

Elasticity of Demand

An index that determines the sensitivity of consumer demand for a product to its price change, by comparing the percent change in the amount of the good demanded with the percent change in its price.

Business Users

Individuals or entities that use goods or services for the purpose of running a business, as opposed to personal or recreational use.

Prime Rib Dinner

A meal featuring a prime rib, which is a cut of beef from the primal rib, traditionally roasted and served as a significant dish in Western cuisine.