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4 September, 05:50

Seven, Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate Direct materials 3.5 feet $ 8.20 per foot Direct labor 1.75 hours $ 7.00 per hour Variable manufacturing overhead 1.75 hours $ 2.60 per hour The company planned to produce 23,100 units of output during June and has reported the following actual results for the product for June: Actual output 24,000 Units Raw materials purchased/used 88,800 Feet Actual total cost of raw materials $ 706,560 Actual direct labor-hours 48,000 Hours Actual total direct labor cost $ 374,400 Actual total variable overhead cost $ 124,800 Assume all of the materials purchased was used during the month to produce the 24,000 units. The price variance for DM is:

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  1. 4 September, 06:16
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    Material price variance $21,600 unfavorable

    Explanation:

    Material price variance

    A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favorable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite

    $

    88, 800 feet should have cost (88, 800 * $8.20) 728,160

    but did cost 706,560

    Material price variance 21,600 unfavorable
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