produces class rings. Its​ best-selling model has a direct materials standard of 1616 grams of a special alloy per ring. This special alloy has a standard cost of $ 63.30$63.30 per gram. In the past​ month, the company purchased 16 comma 80016,800 grams of this alloy at a total cost of $ 1 comma 061 comma 760$1,061,760. A total of 16 comma 30016,300 grams were used last month to produce 1 comma 0001,000 rings.

produces class rings. Its​ best-selling model has a direct materials standard of

1616

grams of a special alloy per ring. This special alloy has a standard cost of

$ 63.30$63.30

per gram. In the past​ month, the company purchased

16 comma 80016,800

grams of this alloy at a total cost of

$ 1 comma 061 comma 760$1,061,760.

A total of

16 comma 30016,300

grams were used last month to produce

1 comma 0001,000

rings.

Requirement 1. What is the actual cost per gram of the special alloy that

World Class RingsWorld Class Rings

purchased last​ month? ​(Round your answer to the nearest​ cent.)

The actual cost per gram of the special alloy that World Class Rings purchased last month is $

63.20

.

Requirement 2. What is the direct material price​ variance? ​(Abbreviations used: DM​ = Direct​ materials)

Begin by determining the formula for the price​ variance, then compute the price variance for direct materials. ​(Enter the variance as a positive number. Round interim calculations to the nearest cent and your variance amount to the nearest whole dollar. Label the variance as favorable​ (F) or unfavorable​ (U).)

	Actual quantity purchased	x (	Actual price	-	Standard price	)	=	DM price variance
	16,800	x (	$63.20	-	$63.30	)	=	$1,680	F

Requirement 3. What is the direct material quantity​ variance? ​(Abbreviations used: DM​ = Direct​ materials)

Determine the formula for the quantity​ variance, then compute the quantity variance for direct materials.​ (Enter the variance as a positive number. Round interim calculations to the nearest cent and your variance amount to the nearest whole dollar. Label the variance as favorable​ (F) or unfavorable​ (U).)

	Standard price	x (	Actual quantity used	-	Standard quantity allowed	)	=	DM quantity variance
	$63.30	x (	16,300	-	16,000	)	=	$18,990	U

Requirement

4.

How might the direct material price variance for the company last month be causing the direct material quantity​ variance?

The

favorable

direct material price variance might mean that

World Class RingsWorld Class Rings

purchased a

lower-quality alloy at a lower price

.

As a​ result, the company

had to use more

alloy than the standard allows. This accounts for the

unfavorable

quantity​ (efficiency) variance.