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Problem 16

# Metal Shelf Company's standard cost for raw materials is $$\ 4.00$$ per pound and it is expected that each metal shelf uses two pounds of material. During 0ctober Year 2,25,000 pounds of materials are purchased from a new supplier for $$\ 97,000$$ and 13,000 shelves are produced using 27,000 pounds of materials. Which statement is a possible explanation concerning the direct materials variances? a. The production department had to use more materials since the quality of the materials was inferior. b. The purchasing manager paid more than expected for materials. c. Production workers were more efficient than anticipated. d. The overall materials variance is positive; no further analysis is necessary.

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= \$100,000 #tag_title# Step 2: Calculate the actual cost of materials purchased#tag_content# The actual cost is given, which is \$ 97,000. #tag_title# Step 3: Calculate the standard quantity for actual production#tag_content# Each metal shelf uses 2 pounds of material, and 13,000 shelves were produced. So, the standard quantity of material for the actual production is: Standard quantity = $$2 \times 13,000$$ shelves = 26,000 pounds #tag_title# Step 4: Calculate the actual quantity used#tag_content# The actual quantity used is given, which is 27,000 pounds of materials. #tag_title# Step 5: Analyze the materials price and quantity variances#tag_content# Now we can analyze the materials price variance (MPV) and materials quantity variance (MQV): MPV = (Standard cost - Actual cost) = (\$100,000 - \$ 97,000) = \$3,000 (Favorable) MQV = (Standard quantity - Actual quantity) × Standard price = (26,000 - 27,000) × \$ 4 = -\$4,000 (Unfavorable) Since the materials price variance is favorable but the materials quantity variance is unfavorable, the correct statement is: _a. The production department had to use more materials since the quality of the materials was inferior._ See the step by step solution ### Step by step solution ## Unlock all solutions Get unlimited access to millions of textbook solutions with Vaia Premium Over 22 million students worldwide already upgrade their learning with Vaia! ## Step 1: Calculate standard cost for purchased materials First, calculate the standard cost of 25,000 pounds of materials. The standard cost for raw materials is$4.00 per pound, so we can calculate the standard cost as follows: Standard cost = $$\ 4.00 \times 25,000$$ pounds

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