Question

Enrique Industries purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of Enrique's accounting records at the end of the period disclosed a material price variance of $5,000U and a material quantity variance of $3,000F, what is the actual price paid for a gallon of direct material

Answer 1

Answer:

$0.7 = actual price

Explanation:

First, we need to calculate the standard price using the direct material quantity variance:

Direct material quantity variance= (standard quantity - actual quantity)*standard price

3,000 = (11,000*5 - 50,000)*standard price

3,000 = 55,000standard price - 50,000standard price

3,000/5,000 = standard price

$0.6= standard price per gallon

To calculate the actual price paid per gallon, we need to use the direct material price variance:

Direct material price variance= (standard price - actual price)*actual quantity

-5,000 = (0.6 - actual price)*50,000

-5,000 = 30,000 - 50,000actual price

-35,000 = -50,000actual price

$0.7 = actual price