Question

Madden Corporation manufactures tminus−​shirts, which is its only product. The standards for tminus−shirts are as​ follows: Standard direct materials cost per yard ​$ 8 Standard direct materials quantity per tminus−shirt ​(yards) 1.5 During the month of​ May, the company produced​ 1,250 tminus−shirts. Related production data for the month​ follows: Actual yards of direct material purchased ​1,400 Actual direct materials total cost ​$ 15,500 What is the direct materials price variance for the​ month? A. ​$4,300 unfavorable B. ​$3,800 favorable C. ​$4,300 favorable D. ​$3,800 unfavorable

Answer 1

The correct option is A

Step-by-step explanation:

The direct materials price variance for the month is computed as:

Direct Material Price Variance = [Actual yards of direct material purchased × (Actual direct materials total cost / Actual yards of direct material purchased ) - Standard direct materials cost per yard]

Direct Material Price Variance = [1,400 × ($15,500/ 1,400) - $8]

= [1,400 × ($11.0714 - $8)]

= 1,400 × $3.0714

= $4,300

It is unfavourable as the Actual Price is more than the standard price.

Therefore, the correct answer is $4,300 unfavourable which is option A.