Answered: Sitka Industries uses a cost system…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 5EA: Sitka Industries uses a cost system that carries direct materials inventory at a standard cost. The...

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Sitka Industries uses a cost system that carries direct materials inventory at a standard cost. The controller has established these standards for one ladder (unit):

Sitka Industries cost standards

	Standard Quantity	Standard Price
Direct materials	4 pounds	$4.17 per pound
Direct labor	4.09 hours	$12.8 per hour

Sitka Industries made 2,568 ladders in July and used 8,950 pounds of material to make these units. Smith Industries bought 15,103 pounds of material in the current period. There was a $220 unfavorable direct materials price variance.

What is the total direct materials cost variance? Round to the nearest whole dollar, no decimals. If it is an unfavorable variance, enter a positive number. If is a favorable variance, enter a negative number using a - dash not parentheses.

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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