Question

The Armstrong Corporation developed a flexible budget for its production process. Armstrong budgeted to use 12,000 pounds of direct material with a standard cost of $ 11 per pound to produce 10,000 units of finished product. Armstrong actually purchased 18,000 pounds and used 13,000 pounds of direct material with a cost of $24 per pound to produce 10,000 units of finished product. Given these​ results, what is​ Armstrong's direct material price​variance?

A. $234,000 unfavorable
B. $156,000 unfavorable
C. $234,000 favorable
D. $156,000 favorable

Answer 1

A. $234,000 unfavorable

Step-by-step explanation:

The direct materials Price variance will be calculated considering the purchased amount.

`(standard\:cost-actual\:cost) * actual \: quantity= DM \: price \: variance`

std cost $11.00

actual cost $24.00

quantity 18,000

difference $(13.00)

`(11 - 24) * 18,000 = DM \: price \: variance`

price variance $(234,000.00)