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    Refineries Incorporated uses chemical X to manufacture oil products. Variance data for the month follows (F indicates a favorable variance, U indicates unfavorable variance):

    Chemical X
    Materials Price Variance $84,000 F
    Materials Efficiency Variance 80,000 U
    Net Materials Variance 4,000 F
    Oil products requiring this chemical 200,000

    The budget allowed one pound of chemical X for each oil product requiring Chemical X. For Chemical X, the average price paid was $.40 per pound less than standard. The company purchased and used all of Chemical X in the given period.

    Calculate the number of pounds of Chemical X purchased.

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    Solution Preview

    Price variance=(Actual price -standard price)X Actual material= -$84,000

    (Actual price -standard price)= -$0.40 per pound (Given)
    Therefore actual material= 210,000 =-84000/-0.4

    Answer: number of pounds of Chemical X purchased= 210,000

    Check: Though this is not required. Let us work out ...

    Solution Summary

    Calculates the number of pounds of Chemical X purchased.