Using the following information, compute the direct material price variance: Actual production, usage, and costs: * units produced: 13,325 units * Direct materials purchased: 132,600 pounts at $5.60 per pound * Direct materials used: 131,900 pounds * Direct labor: 34,450 hours used at a total cost of $347,945 * Machine hours used: 53,235 * Variable manufacturing overhead: $370,516 The following standards were in place for one unit of this product at the beginning of the year: Standard Quantity Standard Price Standard Cost per unit Direct Material 10 pounds per unit $5.50 per pound $55.00 per unit Direct Labor 2.6 hours per unit $10.00 per labor hour $26.00 per unit Variable Overhead 4 machine hours per unit $7.00 per machine hour $28.00 per unit Total standard cost $109.00 per unit Multiple Choice $13,260 Unfavorable $700 Favorable $7,425 Favorable $7,425 Unfavorable

Question

Shyla Nguyen

Business

25 October, 09:13

Using the following information, compute the direct material price variance: Actual production, usage, and costs: * units produced: 13,325 units * Direct materials purchased: 132,600 pounts at $5.60 per pound * Direct materials used: 131,900 pounds * Direct labor: 34,450 hours used at a total cost of $347,945 * Machine hours used: 53,235 * Variable manufacturing overhead: $370,516 The following standards were in place for one unit of this product at the beginning of the year: Standard Quantity Standard Price Standard Cost per unit Direct Material 10 pounds per unit $5.50 per pound $55.00 per unit Direct Labor 2.6 hours per unit $10.00 per labor hour $26.00 per unit Variable Overhead 4 machine hours per unit $7.00 per machine hour $28.00 per unit Total standard cost $109.00 per unit Multiple Choice $13,260 Unfavorable $700 Favorable $7,425 Favorable $7,425 Unfavorable

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Answers (1)

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Freddy Heath · Answer 1

Material price variance = $13,260 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

$

132,600 pounds should have cost (132,600*$5.50) = 729,300

but did cost (actual cost - (132,600 * $5.60) = 742,560

Material price variance 13,260 unfavorable