Prince Company Uses Standard Costs to Control Materials Costs

Essay

Prince Company uses standard costs to control materials costs. The standards call for 3 pounds of materials for each finished unit produced. The standard cost per pound of materials is $2.00. During May, 5,000 finished units were manufactured, 10,000 pounds of materials were used. The price paid for materials was $2.25 per pound. There were no beginning or ending materials inventories.
Required:
a. Determine the flexible budget materials cost for the manufacture of 5,000 finished units.
b. Determine the actual materials cost incurred for the manufacture of 5,000 finished units, and compute the total (flexible budget) materials variance.
c. How much of the difference between the answers to requirements (a) and (b) was related to the price paid for the purchase of materials?
d. How much of the difference between the answers to requirements (a) and (b) was related to the quantity of materials used?