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Majer Corporation makes a product with the following standard costs:

Standard Quantity
or Hours Standard Price or
Rate Standard Cost Per Unit
Direct materials 3.0 ounces $ 6.50 per ounce $ 19.50
Direct labor 0.7 hours $ 12.50 per hour $ 8.75
Variable overhead 0.7 hours $ 5.00 per hour $ 3.50
The company reported the following results concerning this product in February.

Originally budgeted output 6,800 units
Actual output 6,600 units
Raw materials used in production 19,720 ounces
Actual direct labor-hours 4,820 hours
Purchases of raw materials 21,320 ounces
Actual price of raw materials $ 6.25 per ounce
Actual direct labor rate $ 12.75 per hour
Actual variable overhead rate $ 5.00 per hour
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The materials price variance for February is:

Multiple Choice

a) $5,450 F

b) $5,450 U

c) $5,330 F

d) $5,330 U

User Ryan Smith
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2 Answers

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Final answer:

The materials price variance for February is $5,330 Favorable, which is calculated by multiplying the favorable price difference, $0.25 per ounce, by the actual quantity of materials purchased, 21,320 ounces.

Step-by-step explanation:

The materials price variance is calculated by taking the difference between the actual price paid for materials and the standard price, multiplied by the quantity of materials purchased. The standard price per ounce of the raw materials is $6.50 and the actual price paid is $6.25, resulting in a $0.25 favorable variance per ounce. Because the company purchased 21,320 ounces of raw materials, the total materials price variance for February can be calculated as follows:

Materials Price Variance = (Standard Price - Actual Price) × Actual Quantity Purchased

Materials Price Variance = ($6.50 - $6.25) × 21,320 ounces

Materials Price Variance = $0.25 × 21,320 ounces

Materials Price Variance = $5,330 Favorable (F)

Since the actual price of the materials is less than the standard price, the variance is favorable, meaning the company spent less on materials than anticipated.

User Maxmaxmaximus
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7.8k points
0 votes

Final answer:

The materials price variance for February is calculated by subtracting the actual price of $6.25 from the standard price of $6.50 and multiplying by the amount of raw materials purchased, resulting in a favorable variance of $5,330.

Step-by-step explanation:

The materials price variance for Majer Corporation is calculated as the difference between the actual price paid for raw materials and the standard price, multiplied by the quantity of materials purchased. The standard price per ounce is $6.50 and the actual price per ounce is $6.25. The quantity of raw materials purchased is 21,320 ounces.

To find the materials price variance, we use the formula: (Standard Price - Actual Price) x Actual Quantity. Performing the calculation gives us ($6.50 - $6.25) x 21,320 ounces = $0.25 x 21,320 ounces = $5,330. Because the actual price is less than the standard price, this variance is favorable, labeled as 'F'.

User Eli Bendersky
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