Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 41

Materials Variances—Working Backwards SMP Company has the following operating data for the month just completed:

Direct materials purchased	40,000	pounds
Direct materials used	38,000	pounds
Total cost of direct materials purchased	$120,000
Standard price of direct materials	$3.50	per pound
Direct materials usage variance—unfavorable	$6,500

Required Compute for SMP the following:

1. Purchase price per pound for direct materials.

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2. Direct materials purchase-price variance.

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3. Total standard quantity of direct materials allowed for units produced during the period.

Step 1 of 4

Material usage variance is the difference between the actual material usage at the budgeted price and the planned or budgeted material usage in production. Purchase price variance is the difference between the actual purchase price minus the budgeted purchase price multiplied by purchase quantity. F signifies that the result is favorable and U signifies that result is unfavorable.