Question

The following materials standards have been established for a particular product: Standard quantity per unit of output 5.5 meters, Standard price $19.10 per meter. The following data pertain to operations concerning the product for the last month:

Actual materials purchased: 9,200 meters
Actual cost of materials purchased: $182,700
Actual materials used in production: 9,200 meters
Actual output: 1,540 units
What is the materials price variance for the month?
a. $6,980 unfavorable
b. $8,890 unfavorable
c. $8,890 favorable
d. $6,980 favorable

Answer 1

The materials price variance is determined to be $6,980 unfavorable, calculated by comparing the standard cost of materials to the actual cost, indicating the company spent more on materials than was standard. The correct option is A.

Step-by-step explanation:

The materials price variance for the month can be calculated by comparing the standard cost of the materials to the actual cost of the materials purchased. The standard cost for the actual quantity of materials purchased is the standard price per meter multiplied by the actual quantity purchased. The materials price variance is then found by subtracting the standard cost of the materials from the actual cost.

To calculate this: Standard cost = Standard price per meter × Actual quantity purchased = $19.10 × 9,200 meters. Actual cost = $182,700. Materials price variance = Actual cost - Standard cost.

Let's do the math: Standard cost = $19.10 × 9,200 meters = $175,720. Materials price variance = $182,700 - $175,720 = $6,980 unfavorable since the actual cost is higher than the standard cost.