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Standard Costing Problem for Petty Petroleum, Inc

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Petty Petroleum, Inc. uses various chemicals to manufacture its products. Variance data for last month for three primary chemicals used in production are as follows (F indicates a favorable variance; U indicates an unfavorable variance):

X42 AY8 9BZ
Material price variance $84,000 F $50,000 F $42,000 U
Material usage variance 80,000 U 60,000 U 96,000 U
Total material variance (net) $4,000 F $10,000 U $138,000 U
Products requiring this chemical 200,000 220,000 250,000

The standard called for 1 pound of chemical for each product requiring the specific chemical.
Because of falling prices in the chemical industry, Petty Petroleum generally paid less for chemicals last month than in previous months. Specifically, the average price paid was $0.40 per pound less than standard for chemical X42; it was $0.20 less for chemical AY8; and it was $0.14 greater for chemical 9BZ.
All of the chemicals purchased last month were also used during the month.

A. For chemical X42, calculate the number of pounds of material purchased, the standard cost per pound of material purchased, and the total standard material cost.

B. For chemical AY8, calculate the number of pounds of materials purchased, the standard cost per pound of material, and the total standard material cost.

C. For chemical 9BZ, calculate the number of pounds of material purchased, the standard cost per pound of material, and the total standard material cost.

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Solution Summary

The response contains an attached Excel file. Click in cells to see computations. This is a "working backwards" problem and so a little tougher.

Solution provided by:
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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