Detailed Answer
Answer (D) is correct. Since Bettis Company started operations on January 1, there is no beginning inventory of fabric. Bettis produced 20,000 units of finished product at 4 yards of fabric per unit; thus, the finished products used 80,000 yards of fabric. The material quantity variance was $1,240 unfavorable. The firm’s standard cost system allows for $1.55 per yard; thus, the unfavorable material quantity variance comes from using 800 extra yards ($1,240 ÷ $1.55/yard). Therefore, Bettis used 80,800 yards for production (80,000 yards + 800 yards). Direct materials quantity variance = Standard price × (Actual quantity – Standard quantity) $1,240 = $1.55 × (Actual quantity – 80,000 yards) $1,240 = $1.55 × (Actual quantity – $124,000) $125,240 = $1.55 × Actual quantity Actual quantity = 80,800 yards However, this amount is only the direct materials used in production. There were 2,100 yards of fabric included in the ending raw materials inventory that were not used in inventory. Adding these 2,100 yards to 80,800 yards from production yields 82,900 yards purchased during the year.