Question

Use the following data for questions 25 thru 31:

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed based on planned activity of 1,800 core tests:

(Standard Hours or Quantity = SH/Q, Standard Price or Rate = SP/R, Price Per Unit = PP/U).

Direct Materials: SH/Q = 3 pounds, SP/R = $0.75 per pound, PP/U = $2.25
Direct Labor: SH/Q = 0.4 hours, SP/R = $12 per hour, PP/U = $4.80
Variable Manufacturing Overhead: SH/Q = 0.4 hours, SP/R = $9 per hour, PP/U = $3.60
Fixed Manufacturing Overhead: SP/R = $6,800

During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of standard direct labor-hours. The following events occurred during March:

• 7,200 pounds of sand were purchased at a cost of $6,120.
• 7,200 pounds of sand were used for core tests.
• 840 actual direct labor-hours were worked at a cost of $8,610.
• Actual variable manufacturing overhead incurred was $7,240.
• Actual fixed manufacturing overhead incurred was $6,500.

The materials price variance for March is:
A. $720 unfavorable
B. $720 favorable
C. $281 unfavorable
D. $281 favorable

Answer 1

The materials price variance for March is $720 unfavorable.

Step-by-step explanation:

The materials price variance for March can be calculated by multiplying the actual quantity of materials used by the difference between the actual price per unit and the standard price per unit. In this case, the actual quantity of materials used is 7,200 pounds and the difference between the actual price per unit ($0.85) and the standard price per unit ($0.75) is $0.10. Therefore, the materials price variance for March is 7,200 pounds x $0.10 = $720 unfavorable.