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The cost accountant for a drug company has informed you thatthe company's materials quality variance for a Allegra was exactly equal to its materials price variance forthe year. The company's normal level of prodcution is 50 batchesof Allegra per year. However due to uncertantiesregarding foundation funding, it produced only 25 batches duringthe currnet year. Other cost information regarding Allegra'sdirect materials are as follows:

Standard price per gram ofmaterial..........................................$60
Actual kilograms purchased & used drungthe year................100 kg
Actual cost of materials purchased duringthe year..................$6,000,000
Number of grams perkilogram.................................................. 1,00grams

a. Compute the company's material price variance

b. Compute the standard quality of materials allowed perbatch of Allegra produced.

c. Why would you not expect the company to have a largequantity variance.

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Accounting Basics, Accounting

Category:- Accounting Basics
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