Pardee, Inc. completed operations for the week and the accountant was preparing to make journal entries necessary to prepare a set of interim financial statements. Unfortunately, he discovered some of the data concerning direct materials had been lost. He was able to find the following: $$\begin{array} { l c }
\text { Efficiency variance } & \$ 4,500 \text { Unfavourable } \
\text { Standard price } & \$ 10 \text { per unit } \
\text { Actual units purchased } & 9,000 \
\text { Inventory decrease } & 1,000 \text { units } \
\text { Budget variance } & \$ 900 \text { Favourable }
\end{array}$$ The actual direct materials price paid per unit was:
A) $9.60
B) $9.40
C) $10.00
D) $10.60

Question

Pardee, Inc. completed operations for the week and the accountant was preparing to make journal entries necessary to prepare a set of interim financial statements. Unfortunately, he discovered some of the data concerning direct materials had been lost. He was able to find the following: $$\begin{array} { l c } 
\text { Efficiency variance } & \$ 4,500 \text { Unfavourable } \
\text { Standard price } & \$ 10 \text { per unit } \
\text { Actual units purchased } & 9,000 \
\text { Inventory decrease } & 1,000 \text { units } \
\text { Budget variance } & \$ 900 \text { Favourable }
\end{array}$$ The actual direct materials price paid per unit was:
A) $9.60
B) $9.40
C) $10.00
D) $10.60

Quizplus · Accepted Answer

The efficiency variance is calculated as (Actual Quantity - Standard Quantity) x Standard Price. Given the efficiency variance is $4,500 Unfavourable, and the standard price is $10, the actual quantity used must have been 450 units more than the standard quantity. Since inventory decreased by 1,000 units, the actual quantity used is 10,000 units. The budget variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Given the budget variance is $900 Favourable, the actual price must be $0.10 less than the standard price, which is $9.90. However, since the budget variance is based on the actual quantity purchased (9,000 units), the actual price paid per unit is $9.40.

Pardee, Inc The Actual Direct Materials Price Paid Per Unit Was: A)

Pardee, Inc The Actual Direct Materials Price Paid Per Unit Was:
A)