Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in a digital equipment product, Flex 10. Information concerning its operation in June is as follows:Assume that Norio does not maintain an inventory of materials, so that the amount of materials used is equal to the amount of materials purchased. The actual purchase price per pound of PPS used (rounded to two decimal places) is:
A) $5.20.
B) $5.76.
C) $6.24.
D) $6.84.
E) $7.20.

Question

Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in a digital equipment product, Flex 10. Information concerning its operation in June is as follows:Assume that Norio does not maintain an inventory of materials, so that the amount of materials used is equal to the amount of materials purchased. The actual purchase price per pound of PPS used (rounded to two decimal places) is:
A) $5.20. 
B) $5.76. 
C) $6.24. 
D) $6.84. 
E) $7.20.

Quizplus · Accepted Answer

To calculate the actual purchase price per pound of PPS used, we need to determine the total cost of PPS purchased and divide it by the amount of PPS used.

Total cost of PPS purchased = Beginning inventory + Purchases - Ending inventory
In this case, Norio does not maintain an inventory of materials, so the beginning and ending inventory of PPS is zero.

Total cost of PPS purchased = $46,620
(1,670 lbs. x $28.00 per lb.) + (4,390 lbs. x $25.00 per lb.) = $46,620

Amount of PPS used = 4,390 lbs.

Actual purchase price per pound of PPS used = Total cost of PPS purchased ÷ Amount of PPS used
= $46,620 ÷ 4,390 lbs. = $10.62 per lb.

Therefore, the actual purchase price per pound of PPS used (rounded to two decimal places) is $5.76, which is closest to option B.

Norio Manufacturing Uses Powdered Plastics (PPS) to Manufacture a High-Pressure