Question

to produce 1400 units of product chip e last year, cloud plc used 9,000 pounds of material mic, costing $72,000. cloud has established the standard of using 7.5 pounds of material mic per unit of chip e, at a price of $7 per pound. calculate the materials price variance associated with producing 700 units, and indicate whether it is favorable (f) or unfavorable (u):

Answer 1

To calculate the materials price variance for producing 700 units of product chip e last year, we need to find the difference between the actual cost and the standard cost per unit. The materials price variance is unfavorable (u).

Step-by-step explanation:

To calculate the materials price variance, we need to find the difference between the actual cost and the standard cost per unit. The actual cost of using 9,000 pounds of material is calculated by multiplying the price per pound ($72,000) by the actual quantity used (9,000 pounds), which equals $648,000. The standard cost per unit is calculated by multiplying the standard quantity per unit (7.5 pounds) by the standard price per pound ($7), which equals $52.50. Therefore, the standard cost for producing 700 units is $52.50 per unit multiplied by 700 units, which equals $36,750.

The materials price variance is calculated by subtracting the standard cost from the actual cost. In this case, the actual cost ($648,000) minus the standard cost ($36,750) equals $611,250. Since the actual cost is higher than the standard cost, the materials price variance is unfavorable (u).