Punta Cana Company set the following standards for direct materials for 2022: 16 pounds per unit at a standard cost of $7.00 per pound At the end of 2022, Punta Cana reported the following actual results related to direct materials. Purchased 12,000 pounds at $7.15 per pound. 10,000 pounds were used to produce 600 units. Required: Calculate the direct material price variance and direct material quantity variance (show work and clearly label each answer). Note that because the amount purchased does not equal the amount used, you must use the 4-line approach shown in class.
Punta Cana Company set the following standards for direct materials for 2022: 16 pounds per unit at a standard cost of $7.00 per pound At the end of 2022, Punta Cana reported the following actual results related to direct materials. Purchased 12,000 pounds at $7.15 per pound. 10,000 pounds were used to produce 600 units. Required: Calculate the direct material price variance and direct material quantity variance (show work and clearly label each answer). Note that because the amount purchased does not equal the amount used, you must use the 4-line approach shown in class.
Chapter1: Financial Statements And Business Decisions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Punta Cana Company set the following standards for direct materials for 2022:
16 pounds per unit at a standard cost of $7.00 per pound
At the end of 2022, Punta Cana reported the following actual results related to direct materials.
Purchased 12,000 pounds at $7.15 per pound. 10,000 pounds were used to
produce 600 units.
I
Required: Calculate the direct material price variance and direct material quantity variance (show
work and clearly label each answer). Note that because the amount purchased does not equal the
amount used, you must use the 4-line approach shown in class.
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