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24 July, 07:16

A company has established 4 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,500 units of this product, using 6,200 pounds of Material J that cost $11,380. The direct materials price variance is:

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  1. 24 July, 07:20
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    Materials price variance=1020.024

    Materials price variance is 1020.024 is positive so we call it favourable.

    Explanation:

    The formula for Direct materials price variance:

    Materials price variance=Actual Quantity (Standard Price-Actual Price)

    Actual Quantity=6200

    Actual Price=Cost of material/Actual Quantity

    Actual Price=11380/6200

    Actual Price=$1.83548

    Standard Price=$2

    Materials price variance=6200 (2-1.83548)

    Materials price variance=1020.024

    Materials price variance is 1020.024 is positive so we call it favourable.

    Favourable variance means that material is bought at the price less than standard rate.
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Home » Business » A company has established 4 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,500 units of this product, using 6,200 pounds of Material J that cost $11,380.
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