EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

3. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD 3. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD 3. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
3. a. The standard cost per pound of Material B can be computed by ana-lyzing the raw materials inventory account: Material B used in production ... $2,500Add balance, Material B, 3/7... 1,400Total Material B available last week ... 3,900Deduct balance, Material B, 3/1 ... 700Purchases of Material B (at standard cost)... $3,200 Purchases of Material B = $3,200 = $4.00 per poundNumber of pounds purchased 800 lbs.b. Material B drawn from inventory ... $2,500 ÷ $4.00/pound = 625 pounds used Deduct unfavorable quantity variance ... 100 Standard cost of Case 10-35 (continued) Alternative solution for standard quantity: Materials quantity variance = (AQ × SP) – (SQ × SP) $2,500 – (SQ × $4.00 per pound) = $100 U $2,500 – $4 per pound × SQ = $100* $4 per pound × SQ = $2,400 SQ = 600 pounds *When used with the formula, an unfavorable variance is positive. c. 600 pounds ÷ 120 batches = 5 pounds per batch d. Total cost of purchases of materials (accounts payable) ... $11,460 Less cost of Material A purchases (Part 2) ... 7,700 Cost of Material B purchases ... $ 3,760 Materials price variance = (AQ × AP) – (AQ × SP) $3,760 – (800 pounds × $4.00 per pound) = $3,760 – $3,200 = $560 U e. Raw materials (800 pounds × $4.00 per pound) ... 3,200 Materials price variance (800 pounds × $0.70 per pound U)... 560 Accounts payable (800 pounds × $4.70 per pound*) ... 3,760 *$3,760 ÷ 800 pounds = $4.70 per pound Work in process (600 pounds × $4.00 per pound)... 2,400 Materials quantity variance (25 pounds U × $4.00 per pound)... 100 Raw materials (625 pounds × $4.00 per pound) .... 2,500