Western Plastics Company Has the Following Information Concerning Its Direct

Essay

Western Plastics Company has the following information concerning its direct materials: $\begin{array}{lr}\text { Direct Materials: }\\\text { Standard quantity } & 100,000 \\\text { Actual quantity } & 80,000 \\\text { Standard price } & \$ 3 \\\text { Actual price } & \$ 4\end{array}$ Required:
A. Determine the materials price variance and whether it is favourable or unfavourable.
B. Determine the materials usage variance and whether it is favourable or unfavourable.
C. Western Plastics has set control limits stating that actual costs should be investigated if they fall outside the acceptable range of the standard materials cost ±10%.
i. What is the standard materials cost?
ii. What are the upper and lower control limits?
iii. What is the actual materials cost?
iv. Should the actual materials cost be investigated?