Actual Purchase Price Per Yard of Material Accounting Need Help Today

Question

Construction Safety Corporation manufactures orange plastic safety suits for road workers . The following information relates to the corporation's purchases and use of materials for the month of April :

 

Materials Purchased : Total Yards : 8,500

Materials Used In Production : 8,000 Yards

Standard Materials Allowed for Suits Produced : 8,200 yards

 

Construction Safety's materials (purchase) price variance was $1,200 Favorable. Its Materials Quantity Variance for April was $900 Favorable. What was the actual purchase price per yard of material?

 

A) 4.50 B) 4.36 C) 2.86 D) 3.00 E) None

 

Answer was B) but I need help with steps as to how.

Answer 1

Sagnik,

 

The material quantity variance was $900 favorable, this results from 200 yards saved during production. So the cost with no price variance is $900/200 = $4.5 per yard.

 

Now we also have a $1200 favorable price variance

let x be the actual cost of material per yard

8500(4.5-x) = 1200

Solving for x , x = 4.36