Question

The standard materials cost to produce one unit of Product M is 6 pounds of material at a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of material were used at a cost of $51 per pound. What is the total direct material cost variance?

$48,000 unfavorable.
$51,000 favorable.
$51,000 unfavorable.
$3,000 favorable.
$3,000 unfavorable.

Answer 1

$3,000 favorable.

Step-by-step explanation:

The computation of the total direct material cost variance is shown below:

= Material price variance + material quantity variance

where,

The material price variance would be

= Actual Quantity × (Standard Price - Actual Price)

= 47,000 pounds × ($50 - $51)

= 47,000 pounds × $1

= $47,000 unfavorable

And, the material quantity variance would be

= Standard Price × (Standard Quantity - Actual Quantity)

= $50 × (6 pounds × 8,000 units - 47,000 pounds)

= $50 × (48,000 pounds - 47,000 pounds)

= $50 × 1,000 pounds

= $50,000 favorable

So, the total direct material cost variance would be

= $50,000 favorable - $47,000 favorable

= $3,000 favorable