**Direct Material Cost Analysis for Soar, Inc.**Soar, Inc. manufactures a product that involves specific direct material costs. Below is a comparison of the budgeted and actual data for the current month's production processes. **Standard Cost for Direct Materials:**- 1.60 lb. @ $2.50 per lb.**Budget vs. Actual Figures:**| Category | Budget | Actual ||--------------------------------------|--------|---------|| Finished Goods (in units) | 30,000 | 32,000 || Direct Materials Usage (in pounds) | ? | 51,000 || Direct Materials Purchases (in pounds)| 48,000 | 50,000 || Total Cost of Direct Materials Purchases | ? | $120,000 |**Direct Materials Price Variance Options:**Calculating the direct materials price variance can determine how favorable or unfavorable the cost was:A. $500 favorableB. $500 unfavorableC. $5,000 favorableD. $8,000 favorableUnderstanding these variances is essential for assessing financial performance and operational efficiency.

Calculation of material price Variance Material price Variance = (Standard material price per pound - Actual material price per pound) X Actual quantity of meterial purchased = ($ 2.50 per pound - $ 2.40 per pound) x 50,000 pounds = $ 5,000 (Favorable)Calculation of Actual Direct Material cost per unit Actual Direct Material cost per unit = Total cost of material purchased/ Total Actual material purchased = $ 120,000/ 50,000 units = $ 2.40 per unit Therefore, actual direct material cost per unit is $ 2.40.

Business

Accounting

Soar, Inc. manufactures a product that has the direct materials standard cost presented below Budgeted and actual information for the current month for the manufacture of the finished prod and the purchase and use of the direct materials is also presented. Standard cost for direct materials: 1.60 lb. @ $2.50 per lb. Budget Actual 32,000 Finished goods (in units) Direct materials usage (in pounds) 30,000 ? 51,000 Direct materials purchases (in pounds) Total cost of direct materials purchases 48,000 50,000 ? $120,000 Soar's direct materials price variance for the current month is A. $500 favorable. B. $500 unfavorable. C. $5,000 favorable. D cO 000

Soar, Inc. manufactures a product that has the direct materials standard cost presented below Budgeted and actual information for the current month for the manufacture of the finished prod and the purchase and use of the direct materials is also presented. Standard cost for direct materials: 1.60 lb. @ $2.50 per lb. Budget Actual 32,000 Finished goods (in units) Direct materials usage (in pounds) 30,000 ? 51,000 Direct materials purchases (in pounds) Total cost of direct materials purchases 48,000 50,000 ? $120,000 Soar's direct materials price variance for the current month is A. $500 favorable. B. $500 unfavorable. C. $5,000 favorable. D cO 000

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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