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 standard quantity of direct materials allowed for the month was:
A) 10,450
B) 9,000
C) 10,000
D) 9,550

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 standard quantity of direct materials allowed for the month was:
A) 10,450
B) 9,000
C) 10,000
D) 9,550

Quizplus · Accepted Answer

The standard quantity of direct materials allowed for the month can be calculated using the efficiency variance formula: Efficiency Variance = (Actual Quantity - Standard Quantity) x Standard Price. Given an efficiency variance of $4,500 Unfavourable and a standard price of $10 per unit, we can rearrange the formula to solve for the standard quantity: $4,500 = (9,000 - 1,000 - Standard Quantity) x $10. This simplifies to $4,500 = (8,000 - Standard Quantity) x $10. Solving for Standard Quantity gives us 9,550 units.

Pardee, Inc The Standard Quantity of Direct Materials Allowed for the Month