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19 February, 20:57

Milar Corporation makes a product with the following standard costs:

Standard Quantity or Hours Standard Price or Rate

Direct materials 7.7 pounds $ 4 per pound

Direct labor 0.1 hours $ 20 per hour

Variable overhead 0.1 hours $ 4 per hour

In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials price variance for January is:

a. $1,690 U

b. $1,540 F

c. $1,540 U

d. $1,690 F

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  1. 19 February, 22:34
    0
    Direct material price variance = $1,690 favorable

    Explanation:

    Giving the following information:

    Direct materials 7.7 pounds $ 4 per pound

    During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910.

    To calculate the direct material price variance, we need to use the following formula:

    Direct material price variance = (standard price - actual price) * actual quantity

    actual price = 65,910/16,900 = $3.9

    Direct material price variance = (4 - 3.9) * 16,900

    Direct material price variance = $1,690 favorable
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