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7 October, 22:37

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. Direct materials standard (7 kg. @ $1.60/kg.) $11.20 per finished unitActual cost of materials purchased $249,000Actual direct materials purchased and used 142,000 kg. The direct materials price variance is: a. $31,000 unfavorable. b. $52,800 unfavorable. c. $52,800 favorable. d. $21,800 unfavorable. e. $21,800 favorable

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  1. 7 October, 23:04
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    Option D: $21,800 Unfavorable

    Explanation:

    Direct Material Price Variance = Actual Cost of Direct Materials Purchased - Actual Quantity of Direct Materials Purchased at Standard Price

    If,

    Actual Cost of Direct Materials Purchased > Actual Quantity of Direct Materials Purchased at Standard Price = Unfavorable Variance

    Actual Cost of Direct Materials Purchased < Actual Quantity of Direct Materials Purchased at Standard Price = Favorable Variance

    Working

    Direct Material Price Variance = $249,000 - (142,000 Kg * $1.6 per Kg)

    Direct Material Price Variance = $249,000 - $227,000

    Direct Material Price Variance = $21,800

    As per decision rule stated above, Parallel Enterprises has an Unfavorable Direct Material Price Variance of $21,800
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