Question

(CO 8) Southern Company manufactures Product X. The standard cost of one unit of output is $12.00 (four pieces at $3.00 per piece). During the first quarter, 5,000 units were made, at an actual cost of $10.50 per unit (three pieces were $3.50 per piece). What is the material price variance?

Answer 1

The material price variance is $7,500 favorable

Step-by-step explanation:

In this question, the material price variance formula is used which is shown below:

Material price variance = (Standard price - actual price) × Actual quantity

where,

Standard price is $12 per unit

Actual price is $10.50 per unit

And, the actual quantity is 5,000 units

Now, put these values over the above formula

So, the answer would be equal to

= ($12 - $10.5) × 5,000 units

= $1.5 × 5,000 units

= $7,500 favorable

Hence, the material price variance is $7,500 favorable