Module 6 Connect Problem Option 1

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Colorado State University, Global Campus *

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Business

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Feb 20, 2024

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Acme Manufacturing produces corrugated board containers that the nearby wi Many other corrugated board converters are in the area, and competition is str Recently, the industrial engineer and the company’s management accountant Acme has the following standards for its direct materials: Standard direct materials cost per gross of finished boxes = 5 tons of kraft pap During May, the management accountant for the company assembled the follo Actual cost of direct materials used during the month: $616,000 for 44,000 ton Direct materials put into production (used): 44,000 tons Acme began and finished the month of May with no inventory of direct materia Required: Determine the following for Acme: 1. Direct materials price variance, calculated at point of production. Was this v 2. Direct materials usage variance. Was this variance favorable (F) or unfavora 4. Direct materials joint price-quantity variance. Was this variance favorable (F Explanation 1 Direct materials price variance = AQ × (AP − SP) = 44,000 tons × ($14 − $12)/ton = $88,000U 2. Standard direct materials allowed for the units manufactured, SQ: Units of finished product: 8,000 gross of finished boxes 3. "Pure" direct materials price variance. Was this variance favorable (F) or un

8,000 units × 5 tons per unit = 40,000 tons Direct materials usage variance = SP × (AQ − SQ) = $12 per ton × (44,000 tons − 40,000 tons) = $48,000U 3 “Pure” direct materials price variance = SQ × (AP − SP) = 40,000 tons × ($14 − $12) per ton = $80,000U 4. Direct materials joint price-quantity variance = (AP − SP) × (AQ − SQ) = ($14 − $12) per ton × (44,000 − 40,000) tons = $8,000U Note: You can determine the sign of the joint variance by working backwards from the total DM variance [= Total DM variance = (AP × AQ) − (SP × SQ) = ($14 per ton × 44,000 tons) − ($12 per ton × 40,000 tons) = $616,000 − $480,000 = $136,000U Total D ### U Less: " ### U Less: u ### U Direct ### (?) To make the above equation balance, the $8,000 joint variance must be unfavorable (U).

ine industry uses to package wine in bulk. Acme buys kraft paper by the ton, c rong. Acme is eager to keep its costs under control. The company has used a participated in a workshop sponsored by the Institute of Management Account per at $12 per ton = $60 owing data: ns als variance favorable (F) or unfavorable (U)? able (U)? F) or unfavorable (U)? nfavorable (U)?

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(AP × AQ) − (SP × SQ)], subtracting the "pure" price variance and the usage variance (both of which are calcu

converts it to heavy-duty paperboard on its corrugator, and then cuts and glues standard cost system for several years. Responsibility for variances has been tants (IMA) at which there was some discussion of variance analysis. They not

ulated above).

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s it into folding boxes. The boxes are opened and filled with a plastic liner and th established. For example, the purchasing agent is responsible for the direct m ted that the workshop proposed that the responsibility for some variances was

hen with the wine. materials price variance, and the general supervisor answers for the direct mate properly dual. The accountant and engineer reviewed Acme’s system and wer

erials usage variance. re not sure how to adapt the new information to

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