Pardee, Inc. completed operations for the week and the accountant was preparing to make journal entries necessary to prepare a set of interim financial statements. Unfortunately, he discovered some of the data concerning direct materials had been lost. He was able to find the following: Efficiency variance $4,500 Unfavourable
Standard price $10 per unit
Actual units purchased 9,000
Inventory decrease 1,000 units
Budget variance $900 Favourable
The standard cost of the direct materials used was:
A)$90,000
B)$95,500
C)$100,000
D)$94,000

Question

Quizplus · Accepted Answer

The formula for standard cost of direct materials used is:
Standard cost of direct materials used = (Standard price x Actual units purchased) - (Efficiency variance +/- Budget variance) +/- Inventory change

Substituting the given values in the formula:
Standard cost of direct materials used = ($10 x 9,000) - ($4,500 - $900) - 1,000
Standard cost of direct materials used = $90,000 - $3,600 - 1,000
Standard cost of direct materials used = $85,400

Therefore, the best choice is C) $100,000 as it is the closest to the calculated standard cost of direct materials used. It is possible that the missing data could affect the accuracy of the calculated amount, but given the information provided, C) is the most reasonable choice.