Question

Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.2 ounces $ 3.00 per ounce $ 18.60 Direct labor 0.7 hours $ 10.00 per hour $ 7.00 Variable overhead 0.7 hours $ 7.00 per hour $ 4.90 The company reported the following results concerning this product in June. Originally budgeted output 3400 units Actual output 2800 units Raw materials used in production 20,000 ounces Purchases of raw materials 22,300 ounces Actual direct labor-hours 4500 hours Actual cost of raw materials purchases $ 42,100 Actual direct labor cost $ 13,400 Actual variable overhead cost $ 3700 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 June is:

Answer 1

Direct material price variance= $24,753 favorable

Step-by-step explanation:

Giving the following information:

Per Unit Direct materials 6.2 ounces $ 3.00 per ounce

Actual cost of raw materials purchases $ 42,100

Purchases of raw materials 22,300 ounces

To calculate the direct material price variance, we need to use the following formula:

Direct material price variance= (standard price - actual price)*actual quantity

Actual price= 42,100 / 22,300= $1.89

Direct material price variance= (3 - 1.89)*22,300

Direct material price variance= $24,753 favorable