Question

Blaster, Inc., manufactures portable radios. Each radio requires 3 units of Part XBEZ52, which has a standard cost of $1.75 per unit. During May, the company purchased 24,120 units of the part for a total of $43,416. Also during May, the company manufactured 6,240 radios, using 20,620 units of part XBEZ52. The direct materials purchases variance is computed when the materials are purchased. During May, the materials price variance for part XBEZ52 was:

Answer 1

$1,206 unfavorable

Step-by-step explanation:

materials price variance = (AP – SP) x AQ

SP = $1.75

AQ = 24,120 units (units purchased)

AP = $43,416 / 24,120 = $1.80

materials price variance = ($1.80 - $1.75) x 24,120 = $1,206 unfavorable

Since the price paid for each part is higher than the standard price, the variance is unfavorable.