The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. In reviewing the records, you find the following information for May:Materials PurchasedMaterials Used21,000 units15,500 unitsYou find a copy of the budget which shows that materials were budgeted at $0.50 per unit. You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers, which indicate the following:Materials price varianceMaterials efficiency variance$ 210 F$ 650 FWhat was the total standard cost of direct materials allowed during May?Multiple Cholce$6,958$8.232$7,100$8.400 The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. Inreviewing the records, you find the following information for May:Materials PurchasedMaterials UsedYou find a copy of the budget which shows that materials were budgeted at $0.50 per unit. You know that the materials price variance is recorded at the time of purchase and you find somehandwritten notes among the accountant's work papers, which indicate the following:Materials price varianceMaterials efficiency varianceWhat was the total standard cost of direct materials allowed during May?Multiple ChoiceOC$6,958$8,23221,000 units15,500 units$7,100$8,400$210 F$650 FW

The variance is the difference between the standard and actual cost data. The variance can be classified as favorable or unfavorable.Materials efficiency variance = $650 FAQ used = 15,500SP = $0.50Materials efficiency variance = (AQ used - SQ)*SP -650 = (15,500 - SQ)*0.50 -650 = 7,750 – 0.50*SQ 8,400 = 0.5*SQ SQ = 16,800Standard cost of materials allowed = 16,800*$0.5 = $8,400 Option d. $8,400 is the correct value for the standard cost of direct materials allowed.

Answered: The Fantasy Gifts Company, a maker of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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The Fantasy Gifts Company, a maker of Holiday novelties, needs your help immediately. The company's accountant resigned without leaving adequate records or explanations for what she did. In reviewing the records, you find the following information for May: Materials Purchased Materials Used 21,000 units 15,500 units You find a copy of the budget which shows that materials were budgeted at $0.50 per unit. You know that the materials price variance is recorded at the time of purchase and you find some handwritten notes among the accountant's work papers, which indicate the following: Materials price variance Materials efficiency variance $ 210 F $ 650 F What was the total standard cost of direct materials allowed during May? Multiple Cholce $6,958 $8.232 $7,100 $8.400

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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