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The cost accountant for Blue Pharmaceuticals has informed you that the company's materials quantity variance for the drug Allegro was exactly equal to its materials price variance for the year. The company's normal level of production is 80 batches of Allegro per year. However, due to uncertainties regarding foundation funding, it produced only 60 batches during the current year. Other cost information regarding Allegro's direct materials is as follows. Standard price per gram of material $18 Actual kilograms purchased and used during the year 150 kg Actual cost of materials purchased during the period $2,700,000 Number of grams per kilogram 1,000 grams a. Compute Blue's materials price variance. b. Compute the standard quantity of materials allowed per batch of Allegro produced. c. Why would you not expect Blue to have a large materials quantity variance?

The cost accountant for Blue Pharmaceuticals has informed you that the company's materials quantity variance for the drug Allegro was exactly equal to its materials price variance for the year. The company's normal level of production is 80 batches of Allegro per year. However, due to uncertainties regarding foundation funding, it produced only 60 batches during the current year. Other cost information regarding Allegro's direct materials is as follows. Standard price per gram of material $18 Actual kilograms purchased and used during the year 150 kg Actual cost of materials purchased during the period $2,700,000 Number of grams per kilogram 1,000 grams a. Compute Blue's materials price variance. b. Compute the standard quantity of materials allowed per batch of Allegro produced. c. Why would you not expect Blue to have a large materials quantity variance?

FINANCIAL ACCOUNTING
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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The cost accountant for Blue Pharmaceuticals has informed you that the company's materials quantity variance for the drug Allegro was exactly equal to its materials price variance for the year. The company's normal level of production is 80 batches of Allegro per year. However, due to uncertainties regarding foundation funding, it produced only 60 batches during the current year. Other cost information regarding Allegro's direct materials is as follows. als Standard price per gram of material $18 Actual kilograms purchased and used during the year 150 kg Actual cost of materials purchased during the period . $2,700,000 Number of grams per kilogram 1,000 grams Compute Blue's materials price variance. а. b. Compute the standard quantity of materials allowed per batch of Allegro produced. с. Why would you not expect Blue to have a large materials quantity variance? Gumcharo Corr
Transcribed Image Text:The cost accountant for Blue Pharmaceuticals has informed you that the company's materials quantity variance for the drug Allegro was exactly equal to its materials price variance for the year. The company's normal level of production is 80 batches of Allegro per year. However, due to uncertainties regarding foundation funding, it produced only 60 batches during the current year. Other cost information regarding Allegro's direct materials is as follows. als Standard price per gram of material $18 Actual kilograms purchased and used during the year 150 kg Actual cost of materials purchased during the period . $2,700,000 Number of grams per kilogram 1,000 grams Compute Blue's materials price variance. а. b. Compute the standard quantity of materials allowed per batch of Allegro produced. с. Why would you not expect Blue to have a large materials quantity variance? Gumcharo Corr
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