During the period Cash Spinner produced 2,000 units of product. The flexible budget for standard costs is: $\begin{array} { l r }
\quad\quad\text { Direct materials } & \$ 43,000 \
\quad\quad\text { Direct labor } & 67,000 \
\quad\quad\text { Variable overhead } & 30,000 \
\quad\quad\text { Fixed overhead } & 25,000 \
\text { Variances for the period are: } & \
\quad\quad\text { Direct materials price } & \$ 400 \mathrm { U } \
\quad\text { Direct materials efficiency } & 500 \mathrm {~F} \
\quad\text { Direct labor price } & 600 \mathrm {~F} \
\quad\text { Direct labor efficiency } & 200 \mathrm { U } \
\quad\text { Variable overhead spending } & 300 \mathrm {~F} \
\quad\text { Variable overhead efficiency } & 100 \mathrm {~F} \
\quad\text { Fixed overhead spending } & 500 \mathrm {~F} \
\quad\text { Fixed overhead production volume } & 1,000 \mathrm { U }
\end{array}$
The direct materials inventory increased during the period by 500 (at standard cost). What was the actual cost of direct materials purchased during the period?

Question

During the period Cash Spinner produced 2,000 units of product. The flexible budget for standard costs is: $\begin{array} { l r } 
\quad\quad\text { Direct materials } & \$ 43,000 \
\quad\quad\text { Direct labor } & 67,000 \
\quad\quad\text { Variable overhead } & 30,000 \
\quad\quad\text { Fixed overhead } & 25,000 \
\text { Variances for the period are: } & \
\quad\quad\text { Direct materials price } & \$ 400 \mathrm { U } \
\quad\text { Direct materials efficiency } & 500 \mathrm {~F} \
\quad\text { Direct labor price } & 600 \mathrm {~F} \
\quad\text { Direct labor efficiency } & 200 \mathrm { U } \
\quad\text { Variable overhead spending } & 300 \mathrm {~F} \
\quad\text { Variable overhead efficiency } & 100 \mathrm {~F} \
\quad\text { Fixed overhead spending } & 500 \mathrm {~F} \
\quad\text { Fixed overhead production volume } & 1,000 \mathrm { U }
\end{array}$ 
The direct materials inventory increased during the period by 500 (at standard cost). What was the actual cost of direct materials purchased during the period?

Quizplus · Accepted Answer

The standard cost for direct materials is $43,000 for 2,000 units, which means $21.50 per unit. With an increase in inventory by 500 units, the total standard cost for materials used is $43,000 - (500 * $21.50) = $32,250. Considering the $400 unfavorable price variance, the actual cost is $32,250 + $400 = $32,650. Adding back the cost of the 500 units added to inventory (500 * $21.50 = $10,750), the actual cost of materials purchased is $32,650 + $10,750 = $43,400.

During the Period Cash Spinner Produced 2,000 Units of Product