Question

Bubba's flexible budget for July, based upon actual output, called for the use of 5,250 pounds of materials at a standard cost of $3.70 per pound. The Production Department actually used 5,350 pounds of materials costing $3.50 per pound during June.

Bubba's materials price variance for June is:
A. $990 unfavorable.
B. $990 favorable.
C. $1,050 unfavorable.
D. $1,050 favorable.

Answer 1

To calculate Bubba’s materials price variance for June, we use the standard cost and the actual cost of materials based on the actual amount used. After comparing these costs, the materials price variance is found to be $1,070 unfavorable.

Step-by-step explanation:

The student has asked to calculate Bubba’s materials price variance for June. To calculate this, we compare the actual cost of materials to the standard cost outlined in the flexible budget for the actual amount of materials used.

The calculation is as follows:

• Actual Quantity (AQ) x Actual Price (AP) = Actual Cost
• Actual Quantity (AQ) x Standard Price (SP) = Standard Cost based on actual quantity used
• Materials Price Variance = Actual Cost - Standard Cost based on actual quantity used

Using these formulas:

• AQ = 5,350 pounds
• AP = $3.50 per pound
• SP = $3.70 per pound
• Actual Cost = AQ x AP = 5,350 pounds x $3.50/pound
• Standard Cost based on actual quantity used = AQ x SP = 5,350 pounds x $3.70/pound
• Materials Price Variance = (5,350 x $3.50) - (5,350 x $3.70)

After performing the calculations:

• Actual Cost = $18,725
• Standard Cost = $19,795
• Materials Price Variance = $18,725 - $19,795 = $1,070 unfavorable

However, since the student's options do not include this value, there might be a typo in the problem statement or the student's provided options.