Question

The following materials standards have been established for a particular product: Standard quantity per unit of output 4.4 pounds Standard price $ 13.20 per pound The following data pertain to operations concerning the product for the last month: Actual materials purchased 4,800 pounds Actual cost of materials purchased $ 62,880 Actual materials used in production 4,800 pounds Actual output 700 units The direct materials purchases variance is computed when the materials are purchased. What is the materials price variance for the month

Answer 1

The materials price variance for the month is calculated by subtracting the actual cost of materials ($62,880) from the standard cost of the actual quantity of materials ($63,360), resulting in a $480 favorable variance.

Step-by-step explanation:

To calculate the materials price variance for the month, we need to compare the standard cost to the actual cost of the materials purchased. The standard cost for the actual quantity of materials purchased would be the standard price multiplied by the actual quantity of materials purchased. If the actual cost is higher than the standard cost, there is an unfavorable variance, and if it is lower, there is a favorable variance.

The standard price is given as $13.20 per pound, and the actual quantity of materials purchased is 4,800 pounds. Therefore, the standard cost for the actual quantity of materials would be 4,800 pounds × $13.20 per pound = $63,360.

The actual cost of materials purchased is $62,880. To find the materials price variance, we subtract the actual cost from the standard cost: $63,360 - $62,880 = $480. Since the actual cost is less than the standard cost, the variance is favorable.

Thus, the materials price variance for the month is $480 favorable.