Question

Oceanside Marine Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Oceanside uses standard costs to prepare its flexible budget. For the first quarter of the​ year, direct materials and direct labor standards for one of their popular products were as​ follows: Direct​ materials: 2 pound per​ unit; $ 12 per pound Direct​ labor: 4 hours per​ unit; $ 19 per hour Oceanside produced 3 comma 000 units during the quarter. At the end of the​ quarter, an examination of the direct materials records showed that the company used 7 comma 500 pounds of direct materials and actual total materials costs were $ 99 comma 300. What is the direct materials cost​ variance? (Round any intermediate calculations to the nearest​ cent, and your final answer to the nearest​ dollar.) A. $ 3 comma 720 Unfavorable B. $ 9 comma 300 Unfavorable C. $ 3 comma 720 Favorable D. $ 9 comma 300 Favorable

Answer 1

B. $9 comma 300 Unfavorable

Step-by-step explanation:

To calculate the direct material cost variance we use formula :

Cost variance : (Actual cost - Standard cost ) * Actual quantity

Actual cost : Actual total direct material cost / Actual direct material used in pounds

$99,300 / 7500 pounds = $13.24

$13.24 - $12 * 7,500 pounds = $9,300

The actual cost is higher than the standard cost therefore the variance is unfavorable.