Firecracker Company has developed the following standards for one of its products. Direct materials: 15 pounds * $16 per pound Direct labor: 4 hours * $24 per hour Variable manufacturing overhead: 4 hours * $14 per hour The following activity occurred during the month of October: Materials purchased: 10,000 pounds costing $170,000 Materials used: 7,200 pounds Units produced: 500 units Direct labor: 2,300 hours at $23.60/hour Actual variable manufacturing overhead: $30,000 The company records materials price variances at the time of purchase. The direct materials price variance is

Question

Regina Gates

Business

20 May, 13:34

Firecracker Company has developed the following standards for one of its products. Direct materials: 15 pounds * $16 per pound Direct labor: 4 hours * $24 per hour Variable manufacturing overhead: 4 hours * $14 per hour The following activity occurred during the month of October: Materials purchased: 10,000 pounds costing $170,000 Materials used: 7,200 pounds Units produced: 500 units Direct labor: 2,300 hours at $23.60/hour Actual variable manufacturing overhead: $30,000 The company records materials price variances at the time of purchase. The direct materials price variance is

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Answers (1)

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Cruz Gallegos · Answer 1

(-$10,000) Unfavorable

Explanation:

Direct materials:

Quantity = 15 pounds

Standard price = $16 per pound

Actual price = Purchase Price : Purchase quantity

= 170,000 : 10,000

= 17

Material price variance:

= Actual purchase quantity * (Standard price - Actual price)

= 10,000 * ($16 - $17)

= 10,000 * (-$1)

= (-$10,000) Unfavorable