Question

A company uses the following standard costs to produce a single unit of output:

Direct materials 6 pounds at $0.90 per pound = $5.40

Direct labor 0.5 hour at $12.00 per hour = $6.00

Manufacturing overhead 0.5 hour at $4.80 per hour = $2.40

During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.

Based on this information, the direct materials price variance for the month was: _____.

a.$4,000 unfavorable

b. $4,000 favorable

c. $5,800 favorable

d. $1,800 favorable

e. $5,800 unfavorable

Answer 1

Direct material price variance= $5,800 unfavorable

Step-by-step explanation:

Giving the following information:

Direct materials 6 pounds at $0.90 per pound = $5.40

The company purchased and used 58,000 pounds of direct materials for $1.00 per pound to produce 10,000 units of output.

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

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

Direct material price variance= (0.9 - 1)*58,000

Direct material price variance= $5,800 unfavorable