Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 31

(Appendix used in Part b) Variable Cost Variances

Information on Canyon Chemical’s direct materials costs follows:

Quantities of chemical Y purchased and used	28,800	gallons
Actual cost of chemical Y used	$640,000
Standard price per gallon of chemical Y	$22.50
Standard quantity of chemical Y allowed	26,400	gallons

Required

a. What were Canyon Chemical’s direct materials price and efficiency variances?

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b. (Appendix) Prepare the journal entries to record the purchase and use of chemical Y using standard costing.

Step 1 of 3

a.

Formula to calculate direct material price variances

Calculation of direct material price variances

Thus, material price variance is $5,120 F.