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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.

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.