Question

The cost accountant for Blue Pharmaceuticals has informed you that the company’s materials quantity variance for the drug Allegro was exactly equal to its materials price variance for the year. The company’s normal level of production is 50 batches of Allegro per year. However, due to uncertainties regarding foundation funding, it produced only 25 batches during the current year. Other cost information regarding Allegro’s direct materials is as follows:
Standard price per gram of material . . . . . . . . . . . . . . . . . . . . . . . . $60
Actual kilograms purchased and used during the year . . . . . . . . . 100 kg
Actual cost of materials purchased during the period . . . . . . . . . . . . . . $6,000,000
Number of grams per kilogram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000grams

a. Compute Blue’s materials price variance.
b. Compute the standard quantity of materials allowed per batch of Allegro produced.
c. Why would you not expect Blue to have a large materials quantity variance?



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  • CreatedApril 17, 2014
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