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: 22 pound per​ unit; $12 per pound
Direct​ labor: 22 hours per​ unit; $20 per hour
Oceanside produced 1,000 units during the quarter. At the end of the​ quarter, an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and actual total materials costs were $99,300. What is the direct materials cost​ variance? (Round any intermediate calculations to the nearest​ cent, and your final answer to the nearest​ dollar.)
A. $9,300 Unfavorable
B. $1,240 Unfavorable
C. 9,300 Favorable
D. $1,240 Favorable

Answer 1

$9,300 unfavorable

Step-by-step explanation:

The computation of the direct material cost variance is shown below:

Direct material cost variance = standard cost - actual cost

where,

Actual cost is $99,300

And, the standard cost is

= 7,500 pounds of direct material × $12 per pound

= $90,000

So, the direct material cost variance is

= $90,000 - $99,300

= $9,300 unfavorable

Basically we applied the above formula to find out the direct material cost variance