Question

The standard for direct materials for product A is 6 square feet at $10 per square foot. If a firm produces 100 units of product A and uses 600 square feet at $11 per square foot the materials price variance is:

A) $660 unfavorable
B) $660 favorable
C) $600 unfavorable
D) $600 favorable

Answer 1

The materials price variance is calculated by subtracting the standard cost from the actual cost, resulting in a $600 unfavorable variance, indicating that the firm spent more on materials than the standard cost.

Step-by-step explanation:

The materials price variance for the situation where the standard for direct materials for product A is 6 square feet at $10 per square foot and if a firm produces 100 units of product A and uses 600 square feet at $11 per square foot can be calculated as follows:

Standard Cost = Standard quantity × Standard price = 600 square feet × $10 per square foot = $6,000.

Actual Cost = Actual quantity × Actual price = 600 square feet × $11 per square foot = $6,600.

Materials Price Variance = Actual Cost - Standard Cost = $6,600 - $6,000 = $600 unfavorable.

Therefore, the materials price variance is $600 unfavorable, meaning the firm spent $600 more on materials than the standard cost.