Alarm Corporation produces chairs. The standard direct material cost to produce one unit of chairs is four meters of raw materials at $2.50 per meter. During 2015, 4,200 meters of raw materials were purchased at a cost of $10,080. All the purchased materials were actually used to produce 1,000 units of chairs. Assume that Alarm purchased 4,250 meters of materials for $10,200 but used only 4,200. Required: 1. Compute the material purchase price variance 2. Compute the quantity variance 3. Prepare journal entries to record the variance, assuming the variance is determined at the earliest possible time.
Alarm Corporation produces chairs. The standard direct material cost to produce one unit of chairs is four meters of raw materials at $2.50 per meter. During 2015, 4,200 meters of raw materials were purchased at a cost of $10,080. All the purchased materials were actually used to produce 1,000 units of chairs. Assume that Alarm purchased 4,250 meters of materials for $10,200 but used only 4,200. Required: 1. Compute the material purchase price variance 2. Compute the quantity variance 3. Prepare journal entries to record the variance, assuming the variance is determined at the earliest possible time.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alarm Corporation produces chairs. The standard direct material cost to produce one unit of chairs is four meters of raw materials at $2.50 per meter. During 2015, 4,200 meters of raw materials were purchased at a cost of $10,080. All the purchased materials were actually used to produce 1,000 units of chairs.
Assume that Alarm purchased 4,250 meters of materials for $10,200 but used only 4,200.
Required:
1. Compute the material purchase price variance
2. Compute the quantity variance
3. Prepare
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