# Direct Materials Cost Analysis for a Product## Product Cost InformationA company reports the following cost details for one of its products:- **Direct materials standard:** 3 pounds at $2 per pound, totaling $6 per unit- **Actual direct materials used (AQ):** 280,000 pounds- **Actual units produced:** 72,000 units- **Actual cost of direct materials used:** $476,000## Key Terminology- **AQ (Actual Quantity):** The actual amount of materials used in production.- **SQ (Standard Quantity):** The standard amount of materials expected to be used.- **AP (Actual Price):** The actual cost per unit of material.- **SP (Standard Price):** The standard cost per unit of material.## ObjectiveCompute the direct materials price and quantity variances to determine whether each is favorable or unfavorable.## Diagram ExplanationThe diagram consists of two main sections with tables for cost calculations:1. **Actual Cost Section:** - Contains rows and columns for calculating actual cost components using actual quantity and price. 2. **Standard Cost Section:** - Contains rows and columns for calculating standard cost components using standard quantity and price.Each section involves spaces to input values for calculating variances between actual and standard costs. These spaces have directional arrows indicating where calculations should be entered.The variances determined will help identify where the cost efficiencies or inefficiencies lie in terms of material pricing and quantity usage.

Name: # Direct Materials Cost Analysis for a Product## Product Cost Informa
Uploaded: 2024-03-20T06:33:06.000Z
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Description: # Direct Materials Cost Analysis for a Product## Product Cost InformationA company reports the following cost details for one of its products:- **Direct materials standard:** 3 pounds at $2 per pound, totaling $6 per unit- **Actual direct materials

Calculation of Direct material price Variance:: Actual quantity*(Standard price------Actual price).... Actual price per pound:::$4,76,000/2,80,000 pounds=$1.7 per pound... 2,80,000 pounds*($2-$1.7)=2,80,000 pounds*$0.3=$84000(Favourable)..Calculation of Direct material quantity variance:: Standard quantity for actual output is::72000 units*3 pounds =216000 pounds...... Standard price*(Standard Quantity--Actual quantity)... $2*(216000 pounds-2,80,000 pounds)=$2*64000 pounds=$128000(Unfavorable)...

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A company reports the following for one of its products. Direct materials standard (3 pounds e $2 per pound) Actual direct materials used (AQ) Actual units produced Actual cost of direct materials used $ 6 per unit 280,000 pounds 72,000 units $ 476,000 AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price Compute the direct materials price and quantity variances and identify each as favorable or unfavorable. Actual Cost Standard Cost

A company reports the following for one of its products. Direct materials standard (3 pounds e $2 per pound) Actual direct materials used (AQ) Actual units produced Actual cost of direct materials used $ 6 per unit 280,000 pounds 72,000 units $ 476,000 AQ = Actual Quantity SQ = Standard Quantity AP = Actual Price SP = Standard Price Compute the direct materials price and quantity variances and identify each as favorable or unfavorable. Actual Cost Standard Cost

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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