Step-by-step explanation:
1. To calculate the actual cost per gram of the special alloy purchased last month, we divide the total cost of the alloy by the total grams purchased:
Actual cost per gram = Total cost / Total grams
Given:
Total cost = $969,400
Total grams = 14,800
Actual cost per gram = $969,400 / 14,800
Calculating the above expression:
Actual cost per gram = $65.51 (rounded to the nearest cent)
Therefore, the actual cost per gram of the special alloy that Collegiate Rings purchased last month is $65.51.
2. The direct material price variance can be calculated by comparing the actual cost per gram with the standard cost per gram and multiplying it by the actual quantity used:
Direct material price variance = (Actual cost per gram - Standard cost per gram) * Actual quantity used
Given:
Actual cost per gram = $65.51 (from previous calculation)
Standard cost per gram = $65.70
Actual quantity used = 14,300 grams
Direct material price variance = ($65.51 - $65.70) * 14,300
Calculating the above expression:
Direct material price variance = -$2,717.00
Therefore, the direct material price variance is -$2,717.00.
3. The direct material quantity variance measures the difference between the actual quantity used and the standard quantity allowed, multiplied by the standard cost per gram:
Direct material quantity variance = (Actual quantity used - Standard quantity allowed) * Standard cost per gram
Given:
Actual quantity used = 14,300 grams
Standard quantity allowed = 1,000 rings * 14 grams per ring = 14,000 grams
Standard cost per gram = $65.70
Direct material quantity variance = (14,300 - 14,000) * $65.70
Calculating the above expression:
Direct material quantity variance = $19,710.00
Therefore, the direct material quantity variance is $19,710.00.
4. The direct material price variance can impact the direct material quantity variance if the actual cost per gram is higher or lower than the standard cost per gram. If the actual cost per gram is higher than the standard cost, it will contribute to a negative (unfavorable) direct material price variance. This can affect the quantity variance because it may influence the decisions regarding the amount of material used in production. For example, if the cost of the alloy is higher, the company may try to use less material to reduce costs, leading to a higher quantity variance.
In summary, the direct material price variance and the direct material quantity variance are interconnected. The price variance can influence the quantity variance by affecting decisions related to the amount of material used. A higher price variance may lead to efforts to reduce material usage, resulting in a higher quantity variance.