Question

April Industries employs a standard costing system in the manufacturing of its sole product, a park bench. They purchased 60,000 feet of raw material for $240,000, and it takes 5 feet of raw materials to produce one park bench. In August, the company produced 10,000 park benches. The standard cost for material output was $100,000, and there was an unfavorable direct materials quantity variance of $5,000.

A. What is April Industries’ standard price for one unit of material?

B. What was the direct materials price variance for August?

Answer 1

(a) $100,000/10000 = $10

(b)

actual price to produce 1 park bench

= ($240,000/60,000) x 5 = $20

so the direct material price variance in august

= (10-20) x 10,000 = - $100,000