Hushovd Iron Works has collected the following data for its Thunderbolt line of products:Direct materials standard 10 pounds per unit Direct materials standard cost $0.75 per pound Actual material purchased cost $0.85 per pound Actual direct materials purchased 40,000 pounds Actual quantity of direct materials used 35,000 pounds Actual finished goods produced 4,500 unitsWhat is the direct material price variance? A) $4,000 favorableB) $4,000 unfavorableC) $3,500 favorableD) $3,500 unfavorable

The correct answer is D: $3500 unfavorable

Explanation:

Giving the following information:

Standard:

Direct materials standard 10 pounds per unit

Direct materials standard cost $0.75 per pound

Actual:

Material purchased cost $0.85 per pound

Direct materials purchased 40,000 pounds

Direct materials used 35,000 pounds

Finished goods produced 4,500 units

Direct material price variance = (SP-AP) * AQ

SP = standard price

AP = actual price

AQ = standard quantity

Direct material price variance = (0.75-0.85) * 35000

Direct material price variance = $3500 unfavorable