Question

Tharaldson Corporation makes a product with the following standard costs:

Standard Quantity Standard Price Standard Cost
or Hours or Rate Per Unit
Direct materials 7.7 ounces $ 2.00 per ounce $ 15.40
Direct labor 0.8 hours $ 11.00 per hour $ 8.80
Variable overhead 0.8 hours $ 4.00 per hour $ 3.20
The company reported the following results concerning this product in June.
Originally budgeted output 3,100 units
Actual output 2,500 units
Raw materials used in production 22,300 ounces
Purchases of raw materials 23,400 ounces
Actual direct labor-hours 3,600 hours
Actual cost of raw materials purchases $ 45,100
Actual direct labor cost $ 13,100
Actual variable overhead cost $ 3,550
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for June is:_________.
Garrison 16e Rechecks 2017-10-31

Answer 1

Direct material price variance= $1,638 favorable

Step-by-step explanation:

Giving the following information:

Direct materials 7.7 ounces $ 2.00 per ounce $ 15.40

Purchases of raw materials 23,400 ounces

Actual cost of raw materials purchases $ 45,100

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

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

Actual price= 45,100/23,400= $1.93

Direct material price variance= (2 - 1.93)*23,400

Direct material price variance= $1,638 favorable