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:
$$\begin{array} { l l }
\text { Materials Purchased } & 20,000 \text { units } \
\text { Materials Used } & 15,000 \text { units }
\end{array}$$
You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You know that the material 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:
$$\begin{array} { l l }
\text { Material price variance } & \$ 200 \text { F } \
\text { Material efficiency variance } & \$ 600 \text { F }
\end{array}$$
-
What was the total standard cost of direct materials purchased during May?
A) $9,150.
B) $11,800.
C) $12,000.
D) $12,200.

Question

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:
$$\begin{array} { l l } 
\text { Materials Purchased } & 20,000 \text { units } \
\text { Materials Used } & 15,000 \text { units }
\end{array}$$
You find a copy of the budget which shows that materials were budgeted at $0.60/unit. You know that the material 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:
$$\begin{array} { l l } 
\text { Material price variance } & \$ 200 \text { F } \
\text { Material efficiency variance } & \$ 600 \text { F }
\end{array}$$
-
What was the total standard cost of direct materials purchased during May?
A) $9,150.
B) $11,800.
C) $12,000.
D) $12,200.

Quizplus · Accepted Answer

The standard cost of direct materials purchased is calculated by multiplying the budgeted cost per unit by the number of units purchased: 20,000 units * $0.60/unit = $12,000.