Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards.MaterialsItemPer unitCostMetal 1 lb. 63¢ per lb. Plastic 12 oz. $1.00 per lb. Rubber 4 oz. 88¢ per lb. Direct laborItemPer unitCostLabor 15 min. $8.00 per hr. Predetermined overhead rate based on direct labor hours = $3.84The January figures for purchasing, production, and labor are:The company purchased 230,000 pounds of raw materials in January at a cost of 79¢ a pound.Production used 230,000 pounds of raw materials to make 116,000 units in January.Direct labor spent 18 minutes on each product at a cost of $7.90 per hour.Overhead costs for January totaled $45,089 variable and $71,000 fixed.Answer the following questions about standard costs.(a) What is the materials price variance?

Material Price Variance is the difference between the standard price and the actual price for the…

Answered: Waterways Corporation uses very…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 4PA: April Industries employs a standard costing system in the manufacturing of its sole product, a park...

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Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not “ideal” at this point, but the management is working toward that as a goal. At present, the company uses the following standards.

Materials
Item	Per unit	Cost
Metal		1 lb.	63¢ per lb.
Plastic		12 oz.	$1.00 per lb.
Rubber		4 oz.	88¢ per lb.
Direct labor
Item	Per unit	Cost
Labor		15 min.	$8.00 per hr.
Predetermined overhead rate based on direct labor hours = $3.84

The January figures for purchasing, production, and labor are:

The company purchased 230,000 pounds of raw materials in January at a cost of 79¢ a pound.

Production used 230,000 pounds of raw materials to make 116,000 units in January.

Direct labor spent 18 minutes on each product at a cost of $7.90 per hour.

Overhead costs for January totaled $45,089 variable and $71,000 fixed.

Answer the following questions about standard costs.

(a) What is the materials price variance?

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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